-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F4PnHGQPTXwvg/+4yG2vVUkX1YohTzOg1YHoM5yS4aYWweidZOxRr+jumpyqtK3R gQYuffbzo7iaj4OgdLkHNA== 0000944209-97-000621.txt : 19970515 0000944209-97-000621.hdr.sgml : 19970515 ACCESSION NUMBER: 0000944209-97-000621 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALL-COMM MEDIA CORP CENTRAL INDEX KEY: 0000014280 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 880085608 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16730 FILM NUMBER: 97605125 BUSINESS ADDRESS: STREET 1: 400 CORPORATE POINTE STREET 2: SUITE 780 CITY: CULVER CITY STATE: CA ZIP: 90230 BUSINESS PHONE: 310-342-28 MAIL ADDRESS: STREET 1: 400 CORPORATE POINTE SUITE 780 CITY: CULVER CITY STATE: CA ZIP: 90280 FORMER COMPANY: FORMER CONFORMED NAME: SPORTS TECH INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL HOLDINGS INC DATE OF NAME CHANGE: 19920518 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL GAMING CORP DATE OF NAME CHANGE: 19890518 10QSB 1 FORM 10QSB FOR THE PERIOD ENDING 3/31/97 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from_______________to______________ Commission file number 0-16730 ALL-COMM MEDIA CORPORATION --------------------------------- (Exact name of registrant as specified in its charter) Nevada 88-0085608 - -------------------------------- ------------------------------------ (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 400 Corporate Pointe, Suite 780 Culver City, California 90230 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Registrant's telephone number, including area code: (310) 342-2800 -------------- Securities registered pursuant to Section 12(b) of the Act: None ---- Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share -------------------------------------- (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- --- As of May 12, 1997, there were 11,426,764 shares of the Registrant's common stock outstanding. 1 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS FORM 10-QSB REPORT MARCH 31, 1997
PART I - FINANCIAL INFORMATION Page ---- Item 1 Interim Condensed Consolidated Financial Statements (unaudited) Condensed Consolidated Balance Sheets - March 31, 1997 and June 30, 1996 3 Condensed Consolidated Statements of Operations - Three and Nine months ended March 31, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows - Nine months ended March 31, 1997 and 1996 5 Notes to Interim Condensed Consolidated Financial Statements 6-11 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12-18 PART II - OTHER INFORMATION Item 6 Exhibits and Reports of Form 8-K (a) Exhibits 19-20 (b) Reports on Form 8-K 20 Signatures 21 Exhibit 10.18 Demand Promissory Note, February 26, 1997, by and between All-Comm Media Corporation and Jones, Day, Reavis & Pogue Exhibit 10.19 Security Agreement between Milberg Factors, Inc. and Metro Services Group, Inc. Exhibit 10.20 Severance Agreement with Barry Peters Exhibit 10.21 Severance Agreement with E. William Savage Exhibit 10.22 Form of Private Placement Purchase Agreement and Convertible Note Exhibit 11.1 Statements Regarding Computation of Net Loss Per Share Exhibit 27.1 Financial Data Schedule
2 PART I - FINANCIAL INFORMATION ITEM 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------ ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
June 30, 1996 ASSETS March 31, 1997 (as restated) - ------ --------------- ------------- Current assets: Cash and cash equivalents $ 482,660 $ 1,393,044 Accounts receivable, net of allowance for doubtful accounts of $26,000 at March 31 and $34,906 at June 30 4,609,997 2,681,748 Land held for sale at cost 921,465 Other current assets 198,066 107,658 ------------ ----------- Total current assets 5,290,723 5,103,915 Property and equipment at cost, net 769,283 299,045 Intangible assets at cost, net 15,627,719 7,851,060 Other assets 100,285 47,046 ------------ ----------- Total assets $ 21,788,010 $13,301,066 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Short-term borrowings $ 787,676 $ 500,000 Promissory notes, current portion 504,303 Trade accounts payable 3,638,251 470,706 Accrued salaries and wages 473,998 706,039 Other accrued expenses 913,639 758,112 Income taxes payable 17,880 10,000 Long-term obligations to related party, current portion 816,667 583,333 Related party payable 425,000 ------------ ----------- Total current liabilities 7,152,414 3,453,190 Notes payable on repurchase of Series C Preferred Stock 1,000,000 Notes payable to related parties 997,857 Promissory notes, less current portion 203,171 Long-term obligations to related parties less current portion 991,666 1,516,667 Other liabilities 221,731 80,315 ------------ ----------- Total liabilities 10,566,839 5,050,172 ------------ ----------- Commitments and contingencies: Redeemable convertible preferred stock, $.01 par value; consisting of 6,200 shares of Series B Convertible Preferred Stock issued and outstanding at June 30, none at March 31; 2,000 shares of Series C Convertible Preferred Stock issued and outstanding at June 30, none at March 31 1,306,358 ----------- Stockholders' equity: Convertible preferred stock, $.01 par value; 50,000 shares authorized, 8,200 redeemable shares outstanding at June 30, none at March 31 - - Common stock - authorized 6,250,000 shares of $.01 par value at June 30, 1996, increased in August 1996 to 36,250,000; 11,438,564 and 3,198,534 shares issued, respectively 114,386 31,985 Additional paid-in capital 30,079,065 13,173,520 Receivables from stockholders (1,999,500) Accumulated deficit (16,837,311) (6,125,500) Less 11,800 shares of common stock in treasury, at cost (135,469) (135,469) ------------ ----------- Total stockholders' equity 11,221,171 6,944,536 ------------ ----------- Total liabilities and stockholders' equity $ 21,788,010 $13,301,066 ============ =========== See Notes to Condensed Consolidated Financial Statements.
3 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996 (unaudited)
Three Months Ended Nine Months Ended March 31, March 31, 1997 1996 1997 1996 ------------- ----------- ------------- ------------ Revenues $ 6,300,538 $3,723,945 $ 16,146,217 $10,609,781 ----------- ---------- ------------ ----------- Operating costs and expenses: Salaries and benefits 3,660,568 3,124,469 10,487,878 9,055,015 Non-recurring compensation expense on option grants 1,650,000 Direct costs 1,847,493 203,822 3,789,313 526,345 Restructuring costs 1,019,474 1,019,474 Selling, general and administrative 812,262 469,479 2,178,910 1,395,650 Professional fees 215,410 148,291 544,058 364,066 Amortization of intangible assets 208,149 90,061 511,945 271,363 ----------- ---------- ------------ ----------- Total operating costs and expenses 7,763,356 4,036,122 20,181,578 11,612,439 ----------- ---------- ------------ ----------- Loss from operations (1,462,818) (312,177) (4,035,361) (1,002,658) ----------- ---------- ------------ ----------- Other income (expense): Discounts on warrant exercises (5,088,703) (5,088,703) Withdrawn public offering costs (1,307,472) (1,307,472) Gain from sale of land 90,021 Interest income 437 840 14,972 6,854 Interest expense (105,082) (97,911) (353,246) (293,903) ----------- ---------- ------------ ----------- Sub total (6,500,820) (97,071) (6,644,428) (287,049) ----------- ---------- ------------ ----------- Loss before income taxes (7,963,638) (409,248) (10,679,789) (1,289,707) Provision for income taxes (8,083) (12,628) (32,022) (38,703) ----------- ---------- ------------ ----------- Net loss $(7,971,721) $ (421,876) $(10,711,811) $(1,328,410) =========== ========== ============ =========== Net loss attributable to common stockholders* $(7,971,721) $ (421,876) $(20,538,331) $(1,328,410) =========== ========== ============ =========== Net loss per common share $(.96) $(.14) $(3.64) $(.44) =========== ========== ============ =========== Weighted average common and common equivalent shares outstanding 8,291,764 3,047,543 5,639,573 3,027,624 =========== ========== ============ ===========
* The nine months ended March 31, 1997 includes the impact of non-recurring dividends on preferred stock for (a) $8.5 million non-cash dividend on conversion of Series B Preferred Stock; (b) $573,000 on repurchase of Series C Preferred Stock; and (c) periodic non-cash accretions on preferred stock (see Note 9). See Notes to Condensed Consolidated Financial Statements. 4 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996 (unaudited)
1997 1996 ------------ ----------- Operating activities: Net cash used in operating activities $(1,671,411) $ (117,647) ----------- ---------- Investing activities: Net proceeds from sale of land 860,443 Proceeds from issuances of warrants 5,000 Purchases of property and equipment (424,918) (82,313) Payments relating to acquisition of Alliance and SD&A (58,050) Acquisition of Metro, net of cash acquired of $349,446 185,963 ----------- ---------- Net cash provided by (used in) investing activities 626,488 (140,363) ----------- ---------- Financing activities: Repayment on line of credit (504,000) Proceeds from bank loans and line of credit 875,000 350,000 Repayments of bank loans (10,419) (49,694) Proceeds from land option 150,000 Repayments of notes payable other (54,000) Repayment of acquisition debt (291,667) (750,000) Proceeds from exercises of common stock warrants 65,625 120,000 ----------- ---------- Net cash provided by (used in) financing activities 134,539 (233,694) ----------- ---------- Net decrease in cash and cash equivalents (910,384) (491,704) Cash and cash equivalents at beginning of period 1,393,044 1,217,772 ----------- ---------- Cash and cash equivalents at end of period $ 482,660 $ 726,068 =========== ==========
Supplemental schedule of non cash investing and financing activities: In October 1995, in accordance with the acquisition agreement between Alliance Media Corporation and the former owner of SD&A the purchase price was increased by $92,702. In October 1995, the Company issued 6,250 shares of common stock in settlement of a liability of $26,250. Deferred financing costs of $60,000 remained unpaid at December 31, 1995. In September 1996, the Company issued 96,748 shares of common stock, valued at $425,000, as an earn out payment to the former owner of SD&A for achieving certain targeted earnings for the fiscal year ended June 30, 1996. In October 1996, the Company issued 1,814,000 shares of its common stock and $1,000,000 face value in debt to acquire 100% of the outstanding stock of Metro Services Group, Inc. The debt was discounted to $920,000. On December 23, 1996, the Company issued 3,168,857 shares of its common stock and $1,000,000 face value in debt as part of a recapitalization. 6,200 shares of Redeemable Series B Preferred Stock were converted into 2,480,000 common shares; 2,000 shares of Redeemable Series C Preferred Stock were repurchased for $1,000,000 in notes; warrants for 3,000,000 shares were exchanged for 600,000 common shares and $145,753 in accrued interest was converted into 88,857 common shares. (See Note 9). In February 1997, the Company entered into a promissory note payable for legal services totaling $207,950. In March 1997, the Company entered into promissory notes payable for executive management settlement agreements totaling $499,000. At March 31, 1997, $1,999,500 was receivable from stockholders on warrant exercises. See Notes to Condensed Consolidated Financial Statements. 5 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION - ------------------------- The accompanying unaudited Interim Condensed Consolidated Financial Statements include the accounts of All-Comm Media Corporation and Subsidiaries (the "Company"). They have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended March 31, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended June 30, 1996. Certain reclassifications have been made in the fiscal 1996 interim financial statements to conform with the fiscal 1997 presentation. Certain amounts have been reclassified to conform with industry standards. 2. NET LOSS PER COMMON SHARE - ----------------------------- Net loss per common share is computed based upon the weighted average number of shares outstanding during the periods presented and common stock equivalents unless antidilutive. The net loss is reduced by dividends to preferred stockholders to determine the net loss attributable to common stockholders. Primary and fully diluted loss per share are the same in the periods presented. For the nine months ended March 31, 1997, preferred dividends included periodic non-cash increases to accrete the carrying value up to the redemption value, as well as non-recurring dividends incurred as part of the recapitalization described in Note 9. 3. ACQUISITION OF METRO SERVICES GROUP, INC. - --------------------------------------------- Effective as of October 1, 1996, the Company acquired Metro Services Group, Inc. ("Metro") pursuant to a merger agreement. In exchange for all of the then outstanding shares of Metro, the Company issued 1,814,000 shares of its common stock valued at $7,256,000 and promissory notes (the "Notes") totaling $1,000,000. The Notes, which have a stated interest rate of 6%, were discounted to $920,000 to reflect an estimated effective interest rate of 10%. The Notes are due and payable, together with interest thereon, on June 30, 1998, subject to earlier repayment, at the option of the holder, upon completion by the Company of a public offering of its equity securities. The Notes are convertible on or before maturity, at the option of the holder, into shares of common stock at a conversion rate of $5.38 per share. Metro develops and markets information-based services, used primarily in direct marketing by a variety of commercial and tax-exempt organizations, principally in the United States. The acquisition was accounted for using the purchase method of accounting. The purchase price was allocated to assets acquired based on their estimated fair value. This treatment resulted in approximately $7.3 million of costs in excess of net assets acquired, after recording covenants not to compete of $650,000 and proprietary software of $250,000. Such excess is being amortized over the expected period 6 of benefit of forty years. The covenants and software are amortized over their expected benefit periods of three and five years respectively. The operating results of this acquisition are included in the consolidated results of operations from the date of acquisition. The following summary, prepared on a pro forma basis, combines the consolidated results of operations as if Metro had been acquired as of the beginning of the periods presented, after including the impact of certain adjustments, such as amortization of intangibles and increased interest on acquisition debt. The net loss for the nine months ended March 31, 1997 includes the non-cash compensation expense of $1,650,000 recorded on the grant of options in September, 1996, as well as the $5.1 million in warrant discounts and $979,000 in restructuring costs, as discussed in notes 8, 11 and 12.
Unaudited ----------------- For the nine months ended March 31, 1997 1996 ---- ---- Revenues $ 18,360,000 $16,721,000 Net loss $(10,733,000) $(1,309,000) Loss per common share $ (1.72) $ (.27)
The unaudited pro forma information is provided for informational purposes only. It is based on historical information and is not necessarily indicative of future results of operation of the combined entities. 4. CREDIT FACILITIES - --------------------- In December 1996, Stephen Dunn & Associates, Inc. ("SD&A"), a wholly-owned subsidiary of the Company, renewed its credit facility with a commercial bank, increasing its line of credit commitment from $500,000 to a maximum of $750,000. Interest on the outstanding principal is payable monthly at the bank's reference rate plus 1/2%. The line must be repaid in full for at least thirty consecutive days during each twelve month period and it matures on September 30, 1997, renewable at the discretion of the bank. Outstandings on the line of credit totaled $746,000 at March 31, 1997. The credit facility also provides for a term loan totaling $125,000 payable in 35 equal monthly principal installments of $3,473 beginning January 31, 1997. Interest is payable monthly at the bank's reference rate plus 3/4%. The outstanding principal balance as of March 31, 1997 is $114,581. In April, 1997, Metro entered into a two-year renewable credit facility with a lender for a line of credit commitment of up to a maximum of $1,500,000. Interest on outstanding principal will be payable monthly at the Chase Manhattan reference rate plus 1 1/2%. 5. PROMISSORY NOTES - -------------------- On February 26, 1997, the Company entered into a demand promissory note in the amount of $207,950, payable to a law firm for professional services related to the Company's withdrawn public offering. (See note 10). Interest is payable monthly at the rate of 7% per annum. As of March 31, 1997, no payments had been made on the note. In May 1997, the note and accumulated interest thereon were repaid in full. 7 In March 1997, as part of a restructuring, the Company entered into two non- interest bearing promissory notes with two former executive officers. (See Note 11). 6. INCOME TAXES - ---------------- In the three months ended March 31, 1997 and 1996, the income tax provision totaled $8,000 and $13,000, respectively. In the nine month periods ended March 31, 1997 and 1996, the income tax provisions totaled $32,000 and $39,000, respectively. The current period provisions resulted from state and local income taxes incurred on taxable income at the operating subsidiary level which could not be offset by losses incurred at the corporate level. 7. GAIN FROM SALE OF LAND - -------------------------- The Company, through its wholly-owned subsidiary, All-Comm Holdings, Inc., owned approximately seven acres of undeveloped land in Laughlin, Nevada, which had a carrying value of $921,465 as of June 30, 1996. During fiscal 1996, Clark County, Nevada authorities passed a bond measure, resulting in a special assessment to fund improvements which would benefit the land. The principal balance assessed to the Company totaled $154,814 plus interest at 6.4% and was payable in semi-annual installments over twenty years. The principal was capitalized by the Company in fiscal 1996. On August 16, 1996, the land was sold by auction to, and liability assumed by, an unaffiliated third party for $952,000 in cash, resulting in a net gain after commissions and other selling costs of approximately $90,000. 8. STOCK OPTIONS - ----------------- On September 26, 1996, the Board of Directors approved the increase in the number of shares available under the 1991 Stock Option Plan by 600,000 shares, to 1,450,000, and granted options exercisable for 300,000 shares of common stock, par value $.01 per share (the "Common Stock") to each of the Company's Chief Executive Officer and Chief Operating Officer. Options exercisable for the first 150,000 shares were granted to each such officer at an exercise price of $2.50 per share and the remaining 150,000 each were granted at an exercise price of $3.00 per share. On December 23, 1996, the $3.00 options were to be canceled subject to successful completion of an underwritten public offering, as part of the recapitalization described in Note 9. As described in Note 10, the Offering was not consummated and, accordingly, the options were not canceled. The options vest and are exercisable immediately and expire on July 1, 2001. Although the Company intended to grant the options in May, 1996, when the market price of the stock was $2.50, at September 26, 1996, the date of Board ratification, the market price was $5.50. Accordingly, the Company recorded a non-recurring, non-cash charge of $1,650,000 to compensation expense for the difference between market price and exercise price of the options for 600,000 shares. 9. RECAPITALIZATION - -------------------- On December 23, 1996, the Company and certain of its securityholders effected a recapitalization of the Company's capital stock, whereby: (i) the Company's Series B Convertible Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"), was converted, in accordance with its terms without the payment of additional consideration, into 2,480,000 shares of Common Stock; (ii) the Company's Series C Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), was repurchased for promissory notes in an aggregate principal amount of $1.0 million, which 8 promissory notes bore interest at a rate of 8% per annum and were repayable on demand at any time from and after the date of the consummation of an underwritten public offering by the Company of Common Stock, but in any event such notes originally matured June 7, 1998 but were paid in full in April, 1997; (iii) all accrued interest on the Series B Preferred Stock and the Series C Preferred Stock was converted into 88,857 shares of Common Stock; (iv) warrants related to the Series C Preferred Stock, currently exercisable for 3,000,000 shares of Common Stock, were exchanged for 600,000 shares of Common Stock; and (v) options held by two of the Company's principal executive officers to purchase 300,000 shares of common stock were to be canceled at no cost to the Company, subject to successful completion of an underwritten offering. The Offering was not consummated and, accordingly, the options were not canceled. Upon conversion of the Series B Preferred Stock and accumulated interest thereon into Common Stock on December 23, 1996, the Company incurred a non-cash, non- recurring dividend for the difference between the conversion price and the market price of the Common Stock, totaling $8.5 million. Upon repurchase of the Series C Preferred Stock, the Company incurred a non-recurring dividend of $573,000 for the difference between the repurchase price and the accreted book value of the stock at December 23, 1996. These dividends do not impact net income (loss), but do impact net income (loss) attributable to common stockholders in the calculation of earnings per share. 10. WITHDRAWAL OF REGISTRATION STATEMENT - ----------------------------------------- On October 17, 1996, the Company filed a Form SB-2 registration statement (the "Registration Statement") with the Securities and Exchange Commission. The Registration Statement related to an underwritten public offering (the "Offering") of 2,100,000 shares of Common Stock, of which 1,750,000 shares were being offered by the Company and 350,000 were being offered by certain stockholders of the Company. It also related to the sale of 1,381,056 shares of Common Stock by certain selling stockholders on a delayed basis. Due to market conditions, on February 11, 1997, the Company withdrew the Registration Statement. As the Company had intended to refile the Registration Statement, Offering costs incurred through December 31, 1996, of $1.1 million were deferred as of December 31, 1996. Subsequently, the Company elected to pursue other sources of financing and chose not to refile the Registration Statement. As such, in the quarter ended March 31, 1997, the Company expensed $1.3 million in Offering costs, including those deferred at December 31, 1996, as well as additional costs incurred from January 1, 1997 through the date of the withdrawal. 11. RESTRUCTURING COSTS ------------------- During the quarter ended March 31, 1997, the Company effected certain corporate restructuring steps, including the decision to reduce corporate staffing and close its Culver City corporate office, as well as making two executive management changes. In this connection, restructuring expenses of $1,019,000 were recorded, including $65,000 in estimated office closing costs and $954,000 in executive management and other settlement costs. The executive management settlement agreements include two non-interest bearing promissory notes with face values of $290,000 and $250,000, respectively, payable in equal installments over eighteen months starting in May, 1997. These notes have been discounted to $268,000 and $231,000, respectively, to reflect effective interest rates of 10%. 9 12. DISCOUNTS ON WARRANT EXERCISES ------------------------------ In March 1997, to obtain $2.1 million in working capital and reduce the overhang associated with the existence of such warrants, the Company accepted offers from certain warrant-holders to exercise their warrants for 3,152,500 shares of common stock at discounted exercise prices. The Company recognized the dates of acceptance as new measurement dates and, accordingly, recorded non- cash charges totaling $5.1 million in March 1997 to reflect the market value of the discounts. Of the total proceeds from exercise of warrants, $1,999,500 was not received by the Company by March 31, 1997 and was, therefore, classified as receivables from stockholders which reduced stockholders' equity at March 31, 1997. These amounts were received in full in April 1997. 13. RESTATEMENTS FOR CORRECTIONS OF ERRORS - ------------------------------------------- The financial statements for the three months ended September 30, 1996 and year ended June 30, 1996 were restated for corrections of two errors. As originally filed, the financial statements for the three months ended September 30, 1996 did not include compensation expense for the stock options granted to officers (as discussed in Note 8), as the Company intended the options to be granted in May 1996 when the market price of the stock was $2.50. The net loss attributable to common stockholders for the three months ended September 30, 1996 was originally reported at $344,481 and related net loss per share was $(0.11). Subsequently, in accordance with Securities and Exchange Commission requirements it was determined that the grant of these options was not effective until ratification by the Board on September 26, 1996, when the market price was $5.50. Accordingly, the Company amended the financial statements for the three months ended September 30, 1996 to record a non-recurring, non-cash charge of $1,650,000 for compensation expense in connection with the grant of these options, which increased the net loss for the quarter to $1,994,481 and net loss per share to $(0.62). Additionally, as originally filed, the Company reported its Convertible Preferred Stock as equity. The Preferred Stock contained two provisions for mandatory redemption, which the Company had considered remote and not within the control of the holders. Subsequently, in accordance with the Securities and Exchange Commission requirements, these securities were reclassified as mezzanine financing and the September 30, 1996 and June 30, 1996 financial statements were restated accordingly. In conjunction with this, previously recorded dividends of $66,500 for the three months ended September 30, 1996 were reclassified as interest and the net loss of $277,981 increased to $344,481. Previously recorded dividends of $17,490 for the year ended June 30, 1996 were reclassified as interest and the net loss of $1,076,833 increased to $1,094,373. These was no impact on earnings per share, as the dividends had previously increased the net loss attributable to common stockholders. 14. SUBSEQUENT EVENTS - ---------------------- As of March 31, 1997, the Company had not made its February 19, 1997 and March 19, 1997 payments, totaling an aggregate of $140,389, on its debt payable to the former owner of SD&A. These payments were made in full on April 1, 1997. 10 In April 1997, the Company obtained $2,046,000, net of fees, from the private placement of 6% convertible notes, with a face value of $2,200,000. The notes are payable with interest on April 15, 1999, if not previously converted. The notes are convertible into shares of the Company's Common Stock at the lesser of $2.50 per share or 83% of the average closing bid price of the Common Stock during the last five trading days prior to conversion. Also in April 1997, the Company repaid in full $1 million in promissory notes plus interest payable to the former holders of the Company's Series C Preferred Stock. Although these notes were repaid in April, 1997, they are classified as non-current liabilities in the March 31, 1997 balance sheet, as funds for their repayment came from the long-term debt and warrant exercises described previously. As discussed in Note 5, in May 1997, the Company repaid in full a demand promissory note payable to a law firm. 15. NEW ACCOUNTING PRONOUNCEMENT - --------------------------------- The Financial Accounting Standards Board recently issued FASB Statement No. 128, "Earnings Per Share" which is effective for financial statements for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted; however, restatement of all prior-period earnings per share data presented is required. The Company has not yet determined the effect FASB Statement No. 128 will have on its financial statement; however, the adoption is not expected to have a material impact on the financial position or results of operations of the Company. 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS ------------- Introduction - ------------ This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and cash flows of the Company for the three and nine month periods ended March 31, 1997. This should be read in conjunction with the financial statements and notes thereto, included in this Report on Form 10-QSB and the Company's financial statements and notes thereto, included in the Company's Annual Report on Form 10-K for the year ended June 30, 1996. As more fully described in Note 3 to the consolidated financial statements included in such Form 10-K, on April 25, 1995, the Company purchased 100% of the stock of Alliance Media Corporation which had simultaneously acquired Stephen Dunn & Associates, Inc. ("SD&A"). From April 25, 1995 through September 30, 1996, the Company operated as a direct marketing services provider with its initial concentration in a telemarketing and telefundraising company that specializes in direct marketing services for the arts, educational and other cultural organizations. As more fully described in Note 3 to the condensed consolidated financial statements included in this Form 10-QSB, effective October 1, 1996 the Company purchased 100% of the stock of Metro Services Group, Inc. ("Metro"). This acquisition is reflected in the consolidated financial statements using the purchase method of accounting starting October 1, 1996. Metro develops and markets information- based services used primarily in direct marketing by a variety of commercial and tax-exempt organizations. Results of Operations for the Three Months Ended March 31, 1997, Compared to the - -------------------------------------------------------------------------------- Three Months Ended March 31, 1996 - --------------------------------- Revenues of $6,301,000 in the three months ended March 31, 1997 (the "current period") increased by $2,577,000 over revenues of $3,724,000 in the three months ended March 31, 1996 (the "prior period"). $2,624,000 of the increase was attributable to the inclusion of Metro revenues in the current period. Revenues from on-site telemarketing and telefundraising campaigns totaled $2,881,000 and $3,134,000, respectively, or 78% and 84% of telemarketing and telefundraising revenues in the current and prior periods, respectively. The decrease in on- site revenues was principally due to later start dates in the current period for certain recurring annual campaigns. Revenues from off-site campaigns totaled $796,000 and $590,000, respectively, or 22% and 16% of telemarketing and telefundraising revenues, respectively, in the current and prior periods. The increase in off-site revenues resulted from a fifty percent increase in capacity at the Berkeley Calling Center in September, 1996. During the three months ended March 31, 1997 and 1996, the Company's margins relating to off-site campaigns were generally higher than margins relating to on-site campaigns. Salaries and benefits of $3,661,000 in the current period increased by $537,000 over the prior period total of $3,124,000. Salaries and benefits decreased as a percentage of revenues, from 84% in the prior period, to 58% in the current period. Of the dollar increase, $565,000 was attributable to the inclusion of Metro in the current period. SD&A salaries and benefits decreased $26,000 in the current period, largely due to the delays in on-site campaign start dates compared to the prior period. Parent company administrative salaries decreased by $2,000 in the current period as compared to the prior period, principally due to staff head count reductions offset by salary increases for certain executive management. 12 Direct costs of $1,847,000 in the current period increased by $1,643,000 over direct costs of $204,000 in the prior period. Metro direct costs, principally costs of lists rented on behalf of clients, totaled $1,614,000 in the current period. This was offset by an increase in telemarketing and telefundraising costs of $29,000, primarily attributable to increased postage and telephone costs as a result of more off-site campaigns in the current period. Restructuring costs of $1,019,000 were incurred in the current period, as the Company effected certain corporate restructuring steps, including reducing corporate staff and closing its Culver City corporate office, as well as making two executive management changes. In this connection, executive management and other settlement costs of $954,000 and estimated office closing costs of $65,000 were recorded in March 1997. Selling, general and administrative expenses of $812,000 in the current period increased by $343,000 over comparable expenses of $469,000 in the prior period. Of the net increase, $95,000 was attributable to SD&A and $298,000 to the inclusion of Metro. Corporate administration decreased by $50,000. At SD&A, increases of $40,000 were attributable to administrative costs, including depreciation, rent, utilities and insurance, associated with the expansion of the Berkley Calling Center and administration and regulatory costs relating to SD&A's new Canadian campaign. Further increases in computer costs, supplies and depreciation resulted from the purchase and installation of new computer hardware and software at on-site campaigns. Printing, postage, telephone and promotion costs increased at SD&A due to corporate promotion requirements, as well as a January 1997 marketing effort. At the parent company level, the $50,000 decrease was principally due to expenses incurred in the prior year for evaluation of a potential acquisition, which was not consummated, and investigation of related financing sources which were not obtained. Professional fees of $215,000 in the current period, including $89,000 from Metro, increased by $67,000 over professional fees of $148,000 in the prior period. Corporate professional fees increased $44,000 due principally to fees incurred in investigating and reviewing alternate financing proposals after withdrawal of the Company's underwritten public offering, as discussed below. Professional fees at SD&A decreased by $66,000 compared to the prior period, principally due to legal and accounting costs incurred in several renegotiations of the debt payable to the former owner of SD&A in the prior period. Amortization of intangible assets of $208,000 in the current period increased by $118,000 over amortization of $90,000 in the prior period. Of the increase, $113,000 is attributable to the amortization of costs in excess of net tangible assets acquired in the Metro acquisition, including amortization of $650,000 in covenants not to compete and $250,000 in proprietary software amortized over three and five years, respectively. The remaining costs are amortized over their expected period of benefit of forty years. Amortization of the goodwill and a covenant-not-to-compete associated with the Alliance and SD&A acquisitions on April 25, 1995 increased in the current period due to an increase in goodwill of $850,000 as of June 30, 1996 for payments made to the former owner of SD&A resulting from achievement of defined results of operations of SD&A for the year then ended. Discounts on warrant exercises of $5,089,000 were incurred in the current period. To reduce the overhang associated with the existence of such warrants and to obtain working capital subsequent to the withdrawal of its underwritten public offering, the Company accepted offers from certain warrant-holders to exercise their warrants for 3,152,500 shares of Common Stock at discounted exercise prices. The Company recognized the dates of acceptances as new measurement dates and, accordingly, recorded the non-cash charges to reflect the market value of the discounts. 13 Withdrawn public offering costs of $1,307,000 were recorded in the current period. In October 1996, the Company filed a registration statement on Form SB- 2 with the Securities and Exchange Commission relating to an underwritten public offering of 2,100,000 shares. In February, 1996 the Company withdrew the registration statement. As the Company had intended to refile the registration statement, offering costs of $1,122,000 incurred through December 31, 1996 had been deferred as of that date. Subsequently, the Company chose not to refile the registration statement. As such, in the current period the Company expensed all such costs. Interest expense of $105,000 in the current period increased by $7,000, net, compared to $98,000 in the prior period. In the current period, increases of $26,000 resulted from interest payable on notes due to the former owners of Metro, $20,000 due to amounts payable on promissory notes payable to the fomer holders of the Company's Series C Redeemable Preferred Stock and $7,000 of other minor items. This was offset by reductions of $46,000 due to principal payments on the SD&A seller debt and reductions in the interest rate. The provision for income taxes of $8,000 in the current period decreased by $5,000 compared to $13,000 in the prior period. Despite consolidated losses from continuing operations, the current period provision resulted from state and local taxes incurred on taxable income at Metro, which could not be offset by losses incurred at the parent company level. Results of Operations for the Nine Months Ended March 31, 1997, Compared to the - ------------------------------------------------------------------------------- Nine Months Ended March 31, 1996 - -------------------------------- Revenues of $16,146,000 in the nine months ended March 31, 1997 (the "current period") increased by $5,536,000 over revenues of $10,610,000 in the nine months ended March 31, 1996 (the "prior period"). $5,359,000 of the increase was attributable to the inclusion of Metro revenues in the current period, starting October 1, 1996. Revenues from on-site telemarketing and telefundraising campaigns totaled $8,665,000 and $8,866,000, respectively, or 80% and 84% of revenues in the current and prior periods, respectively. Revenues from off-site campaigns totaled $2,122,000 and $1,744,000, respectively, or 20% and 16% of revenues, respectively, in the current and prior periods. The increase in off- site revenues resulted from a fifty percent increase in capacity at the Berkeley Calling Center in September, 1996. During the nine months ended March 31, 1997 and 1996, the Company's margins relating to off-site campaigns were generally higher than margins relating to on-site campaigns. Salaries and benefits of $10,488,000 in the current period increased by $1,433,000 over the prior period total of $9,055,000. Of the increase, $1,107,000 was attributable to the inclusion of Metro in the current period. SD&A salaries and benefits increased $374,000 in the current period, largely due to salary increases and commencement of on-site campaigns for new clients in the current period (which generally require a higher labor expense in the early years). These increases were partially offset by a $48,000 reduction in parent company administrative salaries in the current period as compared to the prior period, due to staff reductions as well as salary reductions during the three months ended September 30, 1996. In addition, in the current period, the Company incurred a non-recurring, non-cash charge of $1,650,000 to compensation expense relating to options granted to two principal executive officers. Such charge was incurred because the exercise price of each option, which was based upon the market price of the common stock on May 30, 1996 (the date which the Company intended as the effective date of the grant) rather than the market price on September 26, 1996 (the actual effective date of the grant), was lower than the market price of the common stock on September 26, 1996. 14 Direct costs of $3,789,000 in the current period increased by $3,263,000 over direct costs of $526,000 in the prior period. Metro direct costs, principally costs of lists rented on behalf of clients, totaled $3,240,000 in the current period. This was offset by an increase in telemarketing and telefundraising costs of $23,000, primarily attributable to increased postage and telephone costs as a result of more off-site campaigns in the current period. Restructuring costs of $1,019,000 were incurred in the current period due to corporate restructuring, as previously discussed. Selling, general and administrative expenses of $2,179,000 in the current period increased by $783,000, over expenses of $1,396,000 in the prior period. Of the net increase, $277,000 was attributable to SD&A and $519,000 to the inclusion of Metro, offset by a decrease of $13,000 in corporate administration. At SD&A, travel and related expenses increased by $83,000 in the current period principally as a result of bringing campaign managers to Los Angeles for training on SD&A's new on-site software. Of the SD&A increase, $38,000 resulted principally from an increase in printing, promotion and advertising expenses related to new marketing efforts and $83,000 was incurred for rent, business taxes and insurance associated with moving and expanding the Berkeley Calling Center, a new Canadian campaign and other. The remaining net increase of $73,000 was principally due to increases in shipping expenses for new on-site computers, as well as related increases in computer supplies, telephone, postage and other. At the parent company level, the net $13,000 decrease included a $95,000 decrease related to acquisitions which were not consummated and investigation of related financing sources which were not obtained in the prior period. This was offset by increases in public relations expenses of $58,000 due to the hiring of a new firm in the current period and rent related expense of $10,000 due to higher parking and utility charges in the current period. The remaining net increase of $14,000 in the current period resulted principally from higher director fees, travel and other. Professional fees of $544,000 in the current period, including $157,000 from Metro, increased by $180,000 over professional fees of $364,000 in the prior period. Corporate professional fees increased by $69,000 in the current period and included a non-recurring charge of approximately $76,000 in consulting fees attributable to the value of warrants acquired by former consultants during the period, offset by minor miscellaneous net decreases of $7,000. Professional fees at SD&A decreased by $46,000 compared to the prior period, principally due to legal and accounting costs incurred in several renegotiations of the debt payable to the former owner of SD&A in the prior period. Amortization of intangible assets of $512,000 in the current period increased by $241,000 over amortization of $271,000 in the prior period. Of the increase, $226,000 is attributable to the amortization of costs in excess of net tangible assets acquired in the Metro acquisition, including amortization of $650,000 in covenants not to compete and $250,000 in proprietary software amortized over three and five years, respectively. The remaining costs are amortized over their expected period of benefit of forty years. Amortization of the goodwill and a covenant-not-to-compete associated with the Alliance and SD&A acquisitions on April 25, 1995 increased in the current period due to an increase in goodwill of $850,000 as of June 30, 1996 for payments made to the former owner of SD&A resulting from achievement of defined results of operations of SD&A for the year then ended. Discounts on warrant exercises of $5,089,000 and withdrawn public offering costs of $1,307,000 were recorded in the current period, as previously discussed. The Company recorded a net gain of $90,000 from the sale of the its undeveloped parcel of land in Laughlin, Nevada in August 1996, which gain was recorded net of commissions and related selling expenses. 15 Interest expense of $353,000 in the current period increased by $59,000 compared to $294,000 in the prior period. Of the net increase, $53,000 was attributable to interest payable on notes due to the former owners of Metro, $127,000 due to amounts payable to the former holders of the Series B Preferred Stock and Series C Preferred Stock in the current period and $22,000 on promissory notes payable to the former holders of the Series C Preferred Stock and $3,000 of other minor items. This was offset by reductions of $146,000 due to principal payments on the SD&A seller debt and reductions in the interest rate. The provision for income taxes of $32,000 in the current period decreased by $7,000 compared to $39,000 in the prior period. Despite consolidated losses from continuing operations, the provision resulted from state and local taxes incurred on taxable income at the operating subsidiary level which could not be offset by losses incurred at the parent company level. Capital Resources and Liquidity - ------------------------------- At March 31, 1997 and June 30, 1996, on a consolidated basis the Company had cash and cash equivalents of $483,000 and $1,393,000, respectively, and accounts receivable net of allowances of $4,610,000 and $2,682,000, respectively. The Company generated net losses of $10,712,000 in the current nine month period and used net cash in operating activities of $1,671,000. These losses in the current period included a non-recurring, non-cash charge of $1,650,000 to compensation expense relating to options granted to two former executive officers of the Company, as well as $1,019,000 in corporate restructuring costs designed to substantially reduce corporate overhead and improve profitability of future operations. The loss also included $1,307,000 in costs incurred on the Company's withdrawn registration statement and $5,089,000 in non-cash discounts on offers accepted from certain warrant holders to induce the exercise of their warrants to provide the Company with working capital and reduce market overhang. Due to seasonal decreases in revenues and certain related expenses between the fourth and third fiscal quarters, at March 31, 1997, accounts receivable relating to the SD&A operation decreased $836,180 and trade accounts payable and accrued liabilities decreased $279,000 compared to levels at June 30, 1996. Primarily due to the seasonal nature of annual subscription renewal campaigns, telemarketing/telefundraising revenues are expected to increase during the fourth fiscal quarter. Historically, the fourth fiscal quarter is the Company's strongest for telemarketing/telefundraising revenues. Starting in October 1996, the Company recognized results of operations of Metro. The fourth calendar quarter, which is the Company's second fiscal quarter, has historically been Metro's strongest. At March 31, 1997, Metro accounts receivable and payable had increased $926,000 and $500,000 , respectively, over levels at October 1, 1996 (acquisition date) due to increases in its business. The Company cannot predict the degree to which, on a consolidated basis, these trends will continue. In the current period, net cash of $626,000 was provided from investing activities. The Company received proceeds of $860,000 from the sale of its land in Laughlin, Nevada, which was net of commissions and related selling expenses. Upon the acquisition of Metro, the Company received $186,000 in cash, net of acquisition costs paid. Purchases of property and equipment of $425,000 resulted primarily from the Company's relocation and expansion of its Berkeley calling center in August 1996 and purchases of computer equipment at Metro and SD&A. 16 The Company intends to continue to expand its business by investing up to approximately $1.0 million for technology, computer systems, software and equipment. Financing for this expansion has been obtained from the issuance of convertible notes and the exercise of outstanding warrants. In the current period financing activities provided $135,000. SD&A had a $500,000 line of credit with a bank which was fully drawn as of June 30, 1996. In December, 1996, SD&A obtained an increase in the line under a revised credit facility which includes a line of credit up to $750,000 and a term loan totaling $125,000. As of March 31, 1997, $746,000 was outstanding under the credit facility and $115,000 under the term loan. In April, 1997, Metro entered into a two-year renewable credit facility with a lender for a line of credit commitment up to a maximum of $1,500,000. In connection with the Metro acquisition, which was affected as of October 1, 1996, the Company issued promissory notes to the former shareholders of Metro in an aggregate principal amount of $1.0 million. Such notes bear interest at 6% per annum, are scheduled to mature June 30, 1998 and are convertible at the option of the holders thereof into 185,874 shares of Common Stock. As described in footnote 9 to the consolidated financial statements included in this Report on Form 10-QSB, on December 23, 1996, the Company and certain of its stockholders effected a recapitalization of the Company's capital stock, whereby: (i) the Company's Series B Convertible Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"), was converted, in accordance with its terms without the payment of additional consideration, into 2,480,000 shares of Common Stock; (ii) the Company's Series C Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), was repurchased for promissory notes in an aggregate principal amount of $1.0 million, which promissory notes bear interest at a rate of 8% per annum and are repayable on demand at any time from and after the date of the consummation of an underwritten public offering by the Company of Common Stock, but in any event such notes mature June 7, 1998; (iii) all accrued interest on the Series B Preferred Stock and the Series C Preferred Stock was converted into 88,857 shares of Common Stock; (iv) warrants related to the Series C Preferred Stock, currently exercisable for 3,000,000 shares of Common Stock, were exchanged for 600,000 shares of Common Stock; and (v) options held by two of the Company's principal executive officers to purchase 300,000 shares of common stock were to be canceled at no cost to the Company, subject to completion of an underwritten public offering. The Offering was not consummated and, accordingly, the options were not canceled. Upon conversion of the Series B Preferred Stock and accumulated interest thereon into Common Stock on December 23, 1996, the Company incurred a non-cash, non-recurring dividend for the difference between the conversion price and the market price of the Common Stock, totaling $8.5 million. Upon repurchase of the Series C Preferred Stock, the Company incurred a non-recurring dividend of $573,000 for the difference between the repurchase price and the accreted book value of the stock at December 23, 1996. The dividends do not impact net income (loss), but do impact net income (loss) attributable to common stockholders in the calculation of earnings per share. On October 17, 1996, the Company filed a Form SB-2 registration statement (the "Registration Statement") with the Securities and Exchange Commission. The Registration Statement related to an offering of 2,100,000 shares of Common Stock, of which 1,750,000 shares were being offered by the Company and 350,000 were being offered by certain stockholders of the Company (the "Offering"). It also related to the delayed sale of 1,381,056 shares of Common Stock by certain selling stockholders. Due to market conditions, on February 11, 1997, the Company withdrew the Registration Statement. As the Company had intended to refile the Registration Statement, Offering costs incurred through December 31, 1996, of $1.1 million were deferred as of December 31, 1996. Subsequently, the Company elected to pursue other sources of financing and chose not to refile the Registration Statement. As such, 17 in the quarter ended March 31, 1997, the Company expensed $1.3 million in Offering costs, including those deferred at December 31, 1996, as well as additional costs incurred from January 1, 1997 through the date of the withdrawal. On February 26, 1997, the Company entered into a demand promissory note in the amount of $207,950, payable to a law firm for professional services related to the Company's withdrawn public offering. Interest was payable monthly at the rate of 7% per annum. In May, 1997, the note was repaid in full. In March 1997, as part of its corporate restructuring, the Company entered into non-interest bearing promissory notes payable to two former executive officers, with face values of $290,000 and $250,000, respectively, payable in equal monthly installments over eighteen months starting in May 1997. In March 1997, the Company accepted offers from certain warrant holders for the exercise of warrants for 3,152,500 shares of common stock at discounted exercise prices. In April 1997, the Company obtained $2,046,000, net of fees, from the private placement of 6% convertible notes, with a face value of $2,200,000. The notes are payable with interest on April 15, 1999, if not previously converted. The notes are convertible into shares of the Company's Common Stock at the lesser of $2.50 per share or 83% of the average closing bid price of the Common Stock during the last five trading days prior to conversion. The proceeds of $3.9 million from the notes and warrant exercises will be used for capital expenditures, debt and registration cost repayment and general corporate purposes. As of March 31, 1997, the Company had not made its February 19, 1997 and March 19, 1997 payments, totaling an aggregate of $140,389, on its debt payable to the former owner of SD&A. These payments were made in full on April 1, 1997. Additional contingent payments in connection with the acquisition of SD&A, based on the achievement of certain defined earnings levels, may be due at the end of fiscal 1997 and 1998, which will continue to increase amortization expense in subsequent years. The Company believes that the funds available from operations, including the operations of Metro, exercise of warrants and issuances of convertible notes, the new Metro credit line and increase in SD&A credit line should be adequate to finance its operations, pay its accrued registration costs and enable the Company to meet operating requirements and interest and debt obligations through its fiscal year ending June 30, 1998. In conjunction with the Company's acquisition and growth strategy, additional financing may be required to complete any such acquisitions and to meet potential contingent acquisition payments. There can be no assurance, however, that such capital, if required, will be available on terms acceptable to the Company, if at all. New Accounting Pronouncement - ---------------------------- The Financial Accounting Standards Board recently issued FASB Statement No. 128, "Earnings Per Share" which is effective for financial statements for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted; however, restatement of all prior-period earnings per share data presented is required. The Company has not yet determined the effect FASB Statement No. 128 will have on its financial statement; however, the adoption is not expected to have a material impact on the financial position or results of operations of the Company. 18 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- a) Exhibits
Exhibit Exhibit Number Item -------------- - -------- ---------------------------------------- (See Notes) (*) 2.1 Agreement and Plan of Merger dated as B (2.1) of October 1, 1996 between All-Comm Media Corporation, Metro Services Group, Inc., Metro Merger Corp. and the Shareholders named therein 3.1 Certificate of Designation for Series C A (3.7) Convertible Preferred Stock 10.1 Form of promissory note of All-Comm B (2.1) Media Corporation issued to former shareholders of Metro Services Group, Inc. (included in Exhibit 2.1) 10.2 Form of Registration Rights Agreement B (2.1) dated as of October __, 1996 between All-Comm Media Corporation and the Shareholders named therein (included in Exhibit 2.1) 10.3 Amendment No. 1 to the Registration C Rights Agreement dated as of October 9, 1996 10.4 Form of Employment Agreement between B (2.1) Metro Services Group, Inc. and Mr. J. Jeremy Barbera (included in Exhibit 2.1) 10.5 Form of Employment Agreement between B (2.1) Metro Services Group, Inc. and Mr. Robert M. Budlow (included in Exhibit 2.1) 10.6 Form of Employment Agreement between B (2.1) Metro Services Group, Inc. and Ms. Janet Sautkulis (included in Exhibit 2.1) 10.7 Form of Series C Convertible Preferred A (10.26) Stock Private Placement Purchase Agreement 10.8 Form of Warrant Certificate Issued to A (10.26) holders of Series C Convertible Preferred Stock (included in Exhibit 10.7) 10.9 Form of letter dated September 10, 1996 C rescinding Private Placement Agreement dated June 7, 1996 10.10 Form of Series B Conversion Agreement A (10.30) 10.11 Form of Warrant Cancellation Agreement A (10.31) 10.12 Form of Series C Repurchase and A (10.32) Exchange Agreement 10.13 Form of Option Cancellation Agreement A (10.33) 10.14 Form of Amended and Restated Series B A (10.34) Conversion Agreement 10.15 Form of Amended and Restated Series C A (10.35) Repurchase and Exchange Agreement 10.16 Form of Amended and Restated Option A (10.36) Cancellation Agreement 10.17 Loan Agreement and Credit Facility, D dated December 27, 1996, by and between Stephen Dunn & Associates, Inc. and 1st Business Bank 10.18 Demand Promissory Note dated February E 26, 1997 10.19 Security Agreement between Milberg E Factors, Inc. and Metro Services Group, Inc. 10.20 Severance Agreement with Barry Peters E 10.21 Severance Agreement with E. William E Savage 10.22 Form of Private Placement Purchase E Agreement and Convertible Note 11.1 Statement Regarding Computation of Net E Loss Per Share 27.1 Financial Data Schedule E
19 Notes relating to Exhibits A Incorporated by reference to the Company's Registration Statement on Form SB- 2, filed on October 17, 1996. B Incorporated by reference to the Company's Report on Form 8-K dated October 11, 1996. C Incorporated by reference to the Company's Report on Form 10-QSB for the quarter ended September 30, 1996. D Incorporated by reference to the Company's Report on Form 10-QSB for the quarter ended December 31, 1996. E Filed herewith. * Numbers in parentheses next to any of the above letters A and B refer to the exhibit numbers within each document from which the Exhibit is incorporated by reference herein. b) Reports on Form 8-K None 20 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALL-COMM MEDIA CORPORATION (Registrant) By: /s/ J. Jeremy Barbera -------------------------------------- J. Jeremy Barbera Chairman and Chief Executive Officer By: /s/ Scott Anderson -------------------------------------- Scott Anderson Chief Financial and Accounting Officer Date: May 12, 1997 21 EX-10.18 2 DEMAND PROMISSORY NOTE EXHIBIT 10.18 DEMAND PROMISSORY NOTE US$207,949.78 February 26, 1997 FOR VALUE RECEIVED, ALL-COMM MEDIA CORPORATION, a Nevada corporation having its principal place of business at 400 Corporate Pointe, Suite 780, Culver City, California 90230 (the "Obligor"), hereby promises to pay ON DEMAND to the order of Jones, Day, Reavis & Pogue (the "Firm") at its office located at 599 Lexington Avenue, New York, New York 10022, or at such other office as Firm shall notify to Obligor (the "Payment Office") the principal sum of TWO HUNDRED SEVEN THOUSAND, NINE HUNDRED FORTY NINE 78/100 UNITED STATES DOLLARS (U.S. $207,949.78) or the then outstanding and unpaid principal amount hereof (the "Indebtedness"), and to pay interest on the unpaid principal amount hereof from time to time outstanding until paid in full at the interest rates, at the times and in the manner provided for below. Section 1. The Indebtedness. This Note evidences indebtedness of the ---------------------------- Obligor to the Firm not due and payable in full in respect of fees for professional services rendered to the Obligor in the State of New York, and related disbursements, in connection with, inter alia, the Obligor's recently ---------- withdrawn public offering of common stock. The Obligor acknowledges and agrees that such professional services were contracted for in the State of New York, have been accepted by Obligor and have been fully and satisfactorily performed, and that the professional fees therefor, and disbursements made and incurred by the Firm in connection therewith, are reasonable in relation to the services the Firm performed for the Obligor, and that pursuant to the conditions upon which the Firm undertook representation of the Obligor, such fees and disbursements are now due and payable in full without reduction or offset, and that the Firm's representation of the Obligor has been satisfactorily completed and no further professionals services are required to be performed by the Firm for the Obligor or its affiliates. The Obligor acknowledges and agrees that it has no claims or counterclaims, defenses or offsets against the Firm in connection with the professional services rendered by the Firm to the Obligor. The Obligor agrees that the existing $10,000 retainer paid by the Obligor to the Firm may, at the Firm's sole discretion and at any time or from time to time, be set off and applied in whole or in part against the Indebtedness evidenced hereby (with the Obligor remaining liable for the remaining unpaid amounts evidenced hereby) or applied to reimburse the Firm for its costs and expenses (including the time expended by attorneys within the Firm at their standard hourly rates) incurred or accrued in enforcing this Note or in preserving its rights hereunder. Section 2 Payments. All payments hereunder for principal, interest ------------------- and other amounts shall be made in U.S. dollars and in immediately available funds, to Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York, New York 10022, Attn: Robert L. Cunningham (the "Payment Office") no later than 2:00 p.m. New York City time on the date when due. Section 3 Interest. -------------------- (a) The Obligor agrees to pay interest in respect of the unpaid principal balance of the Indebtedness outstanding from time to time, from March 31, 1997 until payment in full, at a rate per annum (calculated on the basis of a 365-day year) equal to 7%. Interest shall be payable on the last business day of each calendar month, and on each date of repayment or prepayment of all or part of the Indebtedness. (b) Following demand by the Firm for repayment of the Indebtedness, interest shall accrue on the Indebtedness in its entirety at the rate of 12% per annum and shall be payable on demand. Section 4 Payment of the Note Prior to Demand. The Obligor may ---------------------------------------------- prepay the outstandiing principal of this Note, in whole or in part, without penalty or premium. The payment amount shall be due and payable together with accrued interest to the date of payment on the amount so paid, and all other amounts then due. Section 5 Miscellaneous. --------------------------- (a) This Note shall be binding on the Obligor and its transferees, successors and assigns and shall inure to the benefit of the Firm and its transferees, successors and assigns. The Obligor may not assign or delegate any of its obligations or agreements hereunder. No amendment, modification or waiver of this Note shall be effective unless it is in writing and signed by the Firm and the Obligor. 22 (b) Unless otherwise indicated, all notices and other communications in connection with this Note shall be in writing and shall be effective, if mailed, five days after deposit in the mails, airmail postage prepaid, if sent by telefax, when sent with electronic confirmation received, or if by courier of messenger, when delivered against a receipt, in each case, to the Obligor's address set forth below, or to the firm at its Payment Office. Either party may change its address for notices by written notice to the other. (c) Section headings are for convenience of reference and shall not be construed as part of this Note. (d) The Obligor will indemnify and hold the Firm harmless for, and pay in U.S. dollars, all losses, claims, taxes, costs, fees and expenses, including attorneys' fees including without limitation the fees of attorneys at the Firm at their standard hourly rates, incurred by the Firm in connection with the enforcement of this Note by the Firm or the preservation of its rights hereunder. This provision shall survive repayment of the Indebtedness and cancellation of this Note. (e) All payments hereunder shall be made without setoff or counterclaim, and free and clear of, and without deduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, and all interest, penalties and other liabilities with respect thereto (collectively, "Taxes"), now or hereafter imposed, levied, collected, withheld or assessed by any jurisdiction, or any department, agency, state, political subdivision or taxing authority thereof or therein. If any Taxes are so levied or imposed, the Obligor agrees to pay the full amount thereof, and such additional amounts as may be necessary so that each net payment received by the Firm will be not less than the amount provided for herein. The Obligor will furnish to the Firm within 30 days after each payment of Taxes is due, originals or certified copies of tax receipts evidencing such payment by the Obligor. This provision shall survive repayment of the Indebtedness and cancellation of this Note. (f) THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. [READ, UNDERSTOOD AND AGREED: /s/ BP ] --------------- (g) THE OBLIGOR IRREVOCABLY WAIVES ANY AND ALL REQUIREMENTS OF DEMAND, PRESENTMENT, PROTEST, NOTICE OF DISHONOR OR FURTHER NOTICE OF ANY KIND IN CONNECTION WITH THIS NOTE. [READ, UNDERSTOOD AND AGREED: /s/ BP ] --------------- (h) THE OBLIGOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE. [READ, UNDERSTOOD AND AGREED: /s/ BP ] In any action or proceeding arising out of or relating --------------- to this Note, the Obligor hereby irrevocably submits to the non-exclusive jurisdiction of the courts of the State of New York and the federal courts in New York City, and agrees that effective service of process may be made on the Obligor by mailing same to the Obligor's address set forth below. The Firm may serve process in any other manner permitted by applicable law. The Obligor hereby irrevocably waives any objection to the laying of venue in the aforesaid courts, and any claim of an inconvenient forum. The Obligor agrees that a final judgment in any such action or proceeding shall be conclusive, and may be enforced in any other jurisdiction or in any other permitted manner. [READ, UNDERSTOOD AND AGREED: /s/ BP ] -------------- IN WITNESS WHEREOF, the Obligor has executed and delivered this Note as of the date first above written. ALL-COMM MEDIA CORPORATION By: /s/ Barry Peters Address ------------------------------------- Attn: Chief Executive Officer Barry Peters, Chairman and Chief Executive 400 Corporate Pointe, Suite 780 Officer Culver City, CA 90230 Facsimile: (310) 342-2800 Subscribed and sworn to before me this 27th day of February By: /s/ Carol L. Gilmore ------------------------------------ Carol L. Gilmore, Notary Public, State of New York 23 EX-10.19 3 SECURITY AGREEMENT EXHIBIT 10.19 Milberg Factors, Inc. 99 Park Avenue New York, New York 10016 SECURITY AGREEMENT ------------------ (Accounts Receivable - Financing) Gentlemen: We propose the following arrangements with you, effective as of the date of your acceptance, wherein yu may make loans and advances to us in accordance with the terms, provisions and conditions hereinafter stated: 1. As security for all such loans and advances (both referred to as "Advances"), and for all other debts, liabilities and obligations of every nature whatsoever now or hereafter owing from the undersigned to you, the undersigned hereby sells, assigns, transfers, sets over, hypothecates and pledges to you at your office in the City of New York, with absolute recourse to us, and grants you a security interest in all Receivables (as hereinafter defined) and all general intangibles (as such term is defined in the Uniform Commercial Code) and all intellectual property including but not limited to lists, data, computer memory and software, now or hereafter owned by us. For the purposes of this agreement the term "Receivables" means and includes all accounts, accounts receivable, contract rights, instruments, documents, chattel paper and leases, and any and all other forms of claims or obligations owing to us, whether secured or unsecured, all proceeds thereof including insurance thereon and all or rights as to any merchandise which is represented thereby (delivered or undelivered) including all of our rights of stoppage in transit, replevin and reclamation and as an unpaid vendor or lienor. You shall be privileged to enjoy all the rights and remedies of the seller of such goods and shall be and become subrogated to all guaranties and securities possessed by us or due to come into our hands, but you shall not be liable in any manner for exercising or refusing to exercise any rights thereby bestowed. From time to time at you request, but not less than weekly, we shall provide you with schedules describing all Receivables created or acquired by us, in form satisfactory to you, and shall execute and deliver to you at your office in the City of New York, written assignments of such Receivables to you and shall furnish at the same time copies of customers' invoices or the equivalent, together with original shipping or delivery receipts for all merchandise sold and/or the original of all contracts, mortgages and other documents executed by the customers and/or all notes, bills, acceptances or other evidences of their indebtedness, duly endorsed in blank by us, and at the end of every month a detailed open item Accounts Receivable Trial Balance indicating each customer's name, address and owing by individual invoice and/or any other information or documents you may call upon us from time to time to submit, but your failure to request any or all of the foregoing or our failure to deliver same shall not affect your security interest in or rights to Receivables. 2. At the time of assignment of Receivables and periodically thereafter, you may in your sole and absolute discretion make Advances to us which, in the aggregate at any time outstanding, will not exceed the lesser of (i) $1,500,000.00 (the "Maximum Revolving Amount"), or (ii) eighty percent (80%) (the "Advance Percentage") of the net face amount of all Eligible Receivables (as hereinafter defined), less such reserves as you may deem reasonably proper and necessary from time to time, and you will charge the amount of each such advance to our account. Notwithstanding the above, it is understood that you may, at our request, from time to time advance a sum that is more or less than the sum determined by application of the above percentage of Eligible Receivables and may, in fact, make Advances at a time when there are no Eligible Receivables. You may, or we shall upon request from you, at any time notify customers that Receivables have been assigned to you. You may collect Receivables directly in your own name or our name and charge the collection costs and expenses to our account. But, until you give us other instructions, we shall continue to make collection of all Receivables for you. All payments on account of Receivables shall be your specific property; we shall receive them as your trustee and we shall immediately deliver them to you in their original form. After allowing four (4) banking days for collection time, you will credit all such payments to our account and, subject to the provisions of this Agreement, you will at our request remit to us any net balance standing to our credit on your books, or any part thereof. In consideration for your agreement to make the loans referenced above, upon the execution of this Agreement and upon each anniversary of its effective date, we shall, in addition to the payment of the other fees stated herein, pay you a yearly facility fee equal to one and one-half percent (1 1/2%) of the Maximum Revolving Amount in effect on such date; it being understood that we may, upon 24 written notice to you, elect to reduce the Maximum Revolving Amount at any time, any such reduction being irrevocable. 3. Interest hereunder upon the net balance of our account due at the close of each day, which will be due and payable at the close of each month, shall be based upon the highest publicly announced "reference", "prime", or "base" interest rate of Chase Manhattan Bank (the "Prime Rate") (which is now 8 1/2% per annum) plus one and one-half percent (1 1/2%) (the "Effective Rate"). The effective rate shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal to such increase or decrease in the Prime Rate; each change to be effective as at the first day of the month after the related change in such Prime Rate; but in no event shall the Effective Rate of interest hereunder be less than 8% per annum, nor shall interest charged hereunder be less than $60,000.00 in any contract year, nor in excess of the maximum rate you are permitted to charge by law. However, upon the occurrence of an Event of Default by the undersigned under this Agreement, any supplement hereto or any related agreement and subsequent to any termination of this Agreement pursuant to paragraph 11 hereof, interest upon the net balance of our account due at the close of each day shall be payable at a fluctuating interest rate per annum equal to the Effective Rate plus four percent (4%), but not in excess of the maximum rate permitted by law. Interest shall be calculated on the basis of actual days elapsed and on a 360 day year. Nothing herein shall limit or restrict your right to adjust advance formulas upward or downward and eligibility requirements based upon your lending criteria which is established in your sole discretion and on your own collateral evaluations. You will account monthly to us and each monthly accounting will be final, binding and conclusive upon us unless we give you written notice by registered mail of specified exceptions thereto within 30 days of its date. Such notice shall only be deemed an objection to those items specifically objected to therein. All interest is payable to you daily but shall be charged to our account monthly as a cash advance made by you to us for our account. 4. "Eligible Receivables" shall mean and include each Receivable which -------------------- conforms to the following criteria: (a) shipment of the merchandise or the rendition of services has been completed; (b) no return, rejection or repossession of the merchandise has occurred; (c) merchandise or services shall not have been rejected or disputed by the customer and there shall not have been asserted any offset, defense or counterclaim; (d) it continues to be in full conformity with the representations and warranties made by the undersigned to you with respect thereto; (e) you are, and continue to be, satisfied with the credit standing of the customer in relation to the amount of credit extended; (f) it is documented by an invoice in a form approved by you and shall not be unpaid more than 90 days from the date of invoice; (g) less than 25% of the unpaid amount of invoices due from such customer and its affiliates remain unpaid more than 90 days from the date of invoice; (h) it is not evidenced by chattel paper or an instrument any kind with respect to or in payment of the Receivable unless such instrument is duly endorsed to and in your possession or represents a check in payment of a Receivable; (i) if the customer is located outside of the United States, the goods which gave rise to such Receivable were shipped after receipt by us from or on behalf of the customer of an irrevocable letter of credit, assigned and delivered to you and confirmed by a financial institution acceptable to you and is in form and substance acceptable to you payable in the full amount of the Receivable in United States dollars at a place of payment located within the United States; (j) such Receivable is not subject to any lien other than in your favor; (k) it does not arise out of transactions with any employee, officer, agent, director, stockholder or affiliate of the undersigned; (l) it is payable to the undersigned; (m) it does not arise out of a bill and hold sale prior to shipment or a sale to any customer to whom we are indebted; (n) it is net of any returns, discounts, claims, credits and allowances; (o) if the Receivable arises out of contracts between the undersigned and the United States, any state, or any department, agency or instrumentality of any of them, we have so notified you, in writing, prior to the creation of such Receivable, and, if you so request, there has been compliance with any governmental notice or approval requirements, including without limitation, compliance with the Federal Assignment of Claims Act; (p) it is a good and valid account representing an undisputed bona fide indebtedness incurred by the customer therein named, for a fixed sum as set forth in the invoice relating thereto with respect to an unconditional sale and delivery upon the stated terms of goods sold by the undersigned, or work, labor and/or services rendered by the undersigned; and (q) it is otherwise satisfactory to you as determined in good faith by you in the reasonable exercise of your discretion. We warrant and agree as to each such Receivable that: (i) we have good title thereto and good right to sell, negotiate, pledge and assign the same to you: and (ii) all documents delivered to you in connection therewith will be genuine. If any Eligible Receivable is later deemed ineligible, you shall have the right to demand payment therefor, but such demand or payment therefor shall not be deemed a reassignment and title to all Receivables, Eligible and ineligible, will remain in you until all of our obligations to you have been fully satisfied. Any merchandise which is returned by customers or otherwise recovered, or held subject to bill and hold invoices, shall be set aside, marked in your name, 25 held by us as your trustee and insured by us for your benefit, and shall remain a part of your security until the amount of Receivables represented thereby has been paid to you. We shall notify you promptly of all returns and recoveries of merchandise and of all disputes and claims, and we shall settle or adjust all disputes and claims at no expense to you, but no discount, credit or allowance shall be granted to any customer and no returns of merchandise shall be accepted by us without your prior consent, except in the ordinary course of business and involving less than $25,000.00 in any separate instance. You will always retain the right to settle or adjust disputes and claims directly with customers for amounts and upon terms which you consider advisable and the right to dispose of merchandise returns as you see fit, all without liability to us. In all cases you will credit our account with only the net amounts received by you in payment of Receivables. We exonerate you from any liability for any loss, depreciation or other damage to Receivables unless caused by your willful and malicious act. We agree to execute and authorize you to execute in our name, such further instruments (including financing and continuation statements) as may be required or permitted by any law relating to notices of or affidavits in connection with assignments of accounts receivable or other security granted to you by us and to cooperate with you in the filing or recording and renewal thereof. 5. During the term of this Agreement, we shall not sell, negotiate, pledge, assign or grant or permit to exist any security interest, lien or encumbrance in, any Receivables, general intangibles, goods or inventory (other than sales of inventory in the ordinary course of business) to anyone other than you without your prior consent, nor shall we grant or permit to exist without your prior consent any mortgage, pledge, security interest, encumbrance or lien or any kind upon any of our property, except liens for taxes not yet due, liens incidental to our business which were not incurred in connection with the borrowing of money or obtaining of advances or credit and which do not detract from the value of our assets or impair the use thereof in the operation of our business. We shall immediately place notations upon our books of account to disclose the assignment of all Receivables to you. You will be entitled to hold all sums at any time standing to our credit on your books and all of our property at any time in your possession, or upon or in which you have a lien or security interest, as security for all of our obligations (direct or indirect, absolute or contingent, under this Agreement or otherwise) at any time owing to you and to each corporation which is at any time your parent, subsidiary or affiliate. Such obligations shall include, without limitation, all loans, advances, debts, liabilities, obligations covenants and duties owing by us to, all obligations (direct or indirect, absolute or contingent under this Agreement or otherwise) for purchases made us from other clients factored or financed by you or any such parent, subsidiary or affiliate, no matter how or when arising and whether due or to become due, and further including all interest, fees, charges, expenses and attorney's fees chargeable to our account or incurred in connection with our account whether provided for herein or in any other agreement between us, and you shall have the right to charge to our account the amounts of all such obligations and pay over such amounts to such parent, subsidiary or affiliate. 6. All advances and all other amounts chargeable to our account under this Agreement shall be payable by us on the termination of this Agreement; recourse to security will not be required at any time. We hereby waive presentment and protest of any instrument and notice thereof, notice of default and all other notices to which we might otherwise be entitled. We shall perform all steps requested by you to create and maintain in your favor valid first security interests in and valid first assignments of and/or liens on all Receivables and all other security held by or for you and shall upon your request and at reasonable intervals also furnish you with statements showing our financial condition and the results of our operations and annually, at our expense, we shall furnish you with audited operating statements and balance sheets prepared by independent certified public accountants acceptable to you and accompanied by the unqualified report of such accountants and on each anniversary hereof, a list of our shareholders, officers and directors. We warrant that we and any guarantors of our obligations hereunder are solvent and will so remain during the term of this Agreement. You will have the right at all times to have access to inspect, audit and make extracts from all of our records, files and books of account. We appoint your officers or any other person whom you may designate as our attorney with power to endorse our name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come in your possession; to sign our name on any invoice or bill of lading relating to any Receivable, on drafts against customers, on schedules of assignments of Receivables, on notices of assignment, on financing statements under the Uniform Commercial Code and other public records, on verification of accounts and on notices to customers; to notify the post office authorities to change the address for delivery of our mail to an address designated by you; to receive, open and dispose of all mail addressed to us; to send requests for verifications of accounts to customers; and to do all other things you deem necessary to carry out this Agreement. We hereby ratify and approve all acts of the attorney and neither you nor the attorney will be liable for 26 any acts of commission or omission, nor for any error of judgment or mistake of fact or law. This power, being coupled with an interest, is irrevocable so long as any money remains due to you from us. 7. We agree to keep our books, records and accounts on a current basis in accordance with generally accepted accounting principles, practices and procedures in the United States of America in effect from time to time ("GAAP") and in a manner satisfactory to you at our own cost and expense. All assignments of Receivables to you by is shall be deemed to include all of our right, title and interest to all of our books, records, files and all other data and documents relating to each Receivable. If any tax by any governmental authority is or may be imposed on or as a result of any transaction between us, or in respect to sales or the merchandise affected by such sales, which you are or may be required to withhold or pay, we agree to indemnify and hold you harmless in respect of such taxes, and we will repay you the amount of any such taxes which shall be charged to our account; and until we shall furnish you with an indemnity therefor satisfactory to you (or supply you with evidence satisfactory to you that due provision for the payment thereof has been made), you may hold without interest any balance standing to our credit and you shall retain your security interest in any and all collateral held by you. We hereby represent and warrant during the term of this Agreement that (a) we have submitted to you the address of our chief executive office (set fort below) and the addresses of our other places of business and will promptly notify you in writing of any closing of existing or opening of new places of business; (b) no significant change in management or ownership will be made; (c) we will not guarantee or endorse the obligations of any person1 firm or corporation, except in the ordinary course of business, enter into any merger or consolidation, or purchase or otherwise acquire the obligations, assets or stock of any person, firm, corporation or other enterprise; (d) we will not incur indebtedness for borrowed money, except to you; (e) we shall not at any time permit our Tangible Net Worth (as customarily defined under GAAP) to be less than 250,000.00 and (f) we shall not at any time permit our Working Capital (as customarily defined under GAAP) to be less than $150,000.00. 8. We hereby further represent, warrant and covenant to you that: (a) the execution, delivery and performance of this Agreement any supplements hereto and all related documents, if any, the borrowing of the loans and advances hereunder and thereunder, if any, and the grants of security interests hereunder and thereunder if any, do not and will not (i) violate the provisions of any applicable law. statute, rule, regulation, order or decree to which we are subject, (ii) conflict with, result in a breach of, or constitute a default under, our certificate of incorporation or by-laws, or any indenture, agreement or other instrument to which we are a party, or by which we or any of our property may be bound, or (iii) result in or require the creation or imposition of any security interest, mortgage, pledge or other lien upon any property now owned or hereafter acquired by us other than the security interests granted to you hereunder; (b) the operation of our business is and will remain in compliance in all material respects with all applicable laws including all applicable environmental laws and regulations and all applicable state and federal laws and regulations: (c) based upon the Employee Retirement Income Security Act of 1974 ("ERISA") and the regulations and published interpretations thereunder: (i) we have not engaged in any Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code, as amended, (ii) we have met all applicable minimum funding requirements under Section 302 of ERISA in respect of our plans, (iii) we have no knowledge of any event or occurrence which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any employee benefit plan(s), (iv) we have no fiduciary responsibility for investments with respect to any plan existing for the benefit of persons other than our employees and (v) we have not withdrawn, completely or partially, from any multiemployer pension plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980; (d) we are a corporation duly incorporated, validly existing and in good standing under the laws of the state of our incorporation and are and will remain duly licensed and qualified to do business and are in good standing in all other states where the nature of our business makes licensing or qualification as a foreign corporation necessary; (e) there are no pending or threatened investigations, actions or proceedings before or by any court, govemmental department, commission, board, bureau or administrative agency which if adversely determined would materially affect our condition, business or operation; (f) we own and have good and marketable title to all of the goods and chattels and other assets real and personal in which a lien or security interest is given to you under your security agreements free and clear of all liens, charges and encumbrances other than liens set forth on any schedule annexed to said agreements; (g) we have filed all required tax returns and paid applicable United States federal, state and local taxes, if any, other than taxes not yet due or which may hereafter be paid without penalty, and have no knowledge of any deficiency or additional assessment in connection therewith not provided for on our books and will continue to do so during the term hereof; (h) we are (i) in compliance with, and (ii) have procured and are now in possession of, all licenses or permits required by any 27 applicable federal, state or local law or regulation for the operation of our business in each jurisdiction wherein we are now conducting or propose to conduct business; (i) we are not in default in the payment of the principal of or interest on any indebtedness for borrowed money or under any instrument or agreement under and subject to which any indebtedness for borrowed money has been issued and no event has occurred under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute, an event of default thereunder; (j) we will promptly inform you of: (i) the commencement of all proceedings and investigations by or before any governmental or nongovernmental body and all actions and proceedings in any court or before any arbitrator against or in any way concerning any of our properties, assets or business, which might singly or in the aggregate, have a materially adverse effect on us, (ii) any amendment of our certificate of incorporation or by-laws, (iii) any change in our business, assets, liabilities, financial condition, results of operations or business prospects which has had or might have any materially adverse effect on us, (iv) any default or Event of Default hereunder or any event which with the passage of time or giving of notice or both would constitute a default or Event of Default, (v) any default or any event which with the passage of time or giving of notice or both would constitute a default under any agreement for the payment of money to which we are a party or by which we or any of our properties may be bound or which would have a material adverse effect on our business, operations, property or financial condition, (vi) any change in the location of our places of business, and (vii) any change in our corporate name; (k) all financial, projections prepared by us or at our direction and delivered to you will represent, at the time of delivery to you, our best estimate of our future financial performance and will be based upon assumptions which are valid in light of the then current business conditions; and (l) all balance sheet and income statements which have been delivered to you fairly, accurately and properly state our financial condition and there has been no material adverse change in our financial condition as reflected in such statements since the date of the latest thereof and such statements do not fail to disclose any fact or facts which might materially and adversely affect our financial condition. 9. We irrevocably waive the right to: (i) direct the application of any and all payments at any time or times hereafter received by you from or on our behalf and we do hereby irrevocably agree that you shall have the continuing exclusive right to apply and reapply any and all payments received at any time or times hereafter against our debts and obligations hereunder in such manner as you may deem advisable notwithstanding any entry by you upon any of your books and records: (ii) pay any management fees or make any similar payments or declare any dividends, except dividends payable exclusively in our stock or redeem any of our stock or make any other payments in respect of our stock that are the equivalent to dividends or stock redemption payments, to any shareholder or affiliate as long as any debts and obligations hereunder remain outstanding without your express prior written consent; and (iii) issue any guarantees of the obligations of any third person or entity as long as any debts and obligations hereunder remain outstanding, without your express prior written consent. 10. Since the transactions hereunder will take place at your office in the City of New York, this Agreement and all transactions, assignments and transfers hereunder, and all rights of the parties, shall be governed as to validity, construction, enforcement and in all other respects by the laws of the State of New York. Each of the parties to this Agreement expressly submits and consents to the jurisdiction of the courts of the State of New York, in the County of New York, with respect to any controversy arising out of or relating to this Agreement or any amendment or supplement hereto or to any transactions in connection herewith and each of the parties to this Agreement hereby waives personal service of any summons or complaint or other process or papers to be issued in any action or proceeding involving any such controversy and hereby agrees that service of such summons or complaint or process may be made by registered or certified mail to the other party at the address appearing herein; failure on the part of either party to appear or answer within thirty (30) days of such mailings of such summons, complaint or process shall constitute a default entitling the other party to enter a judgment or order as demanded or prayed for therein to the extent that said Court or duly authorized officer thereof may authorize or permit. 11. This Agreement shall have an initial term of two years from its effective date and shall thereafter be automatically renewed for successive periods of two years unless terminated by us at the conclusion of its initial term or any renewal term by giving you at least sixty (60) days prior written notice; provided, however, that you may terminate it at any tune during the initial term or any. renewal term by giving us at least sixty (60) days prior written notice. The mailing of a registered or certified letter of notice addressed by one party to the other at its usual address shall constitute sufficient notice, and the termination shall be effective on the appropriate date specified in such letter. Upon the effective date of termination all outstanding Advances and all other moneys chargeable to our 28 account under this Agreement, supplements hereto, or otherwise, shall become immediately due and payable without further notice or demand. Your rights with respect to obligations owing to you prior to the effective date of termination will not be affected by termination, and all of the provisions of this Agreement, including without limitation, all of our representations, warranties, covenants and agreements and all other provisions binding upon us contained herein, shall continue operative until all such obligations have been fully satisfied or indemnified in a manner satisfactory to you. 12. To the extent you receive any payment or payments by or on our behalf which payment or payments, or any part thereof, are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be'repaid to us, our estate, trustee, receiver, custodian or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof which has been paid, reduced or satisfied by the amount so repaid shall be reinstated and included within the liabilities as of the date such initial payment, reduction or satisfaction occurred and same shall be secured by our assets in which you have been granted a lien or security interest. 13. The occurrence of any one or more of the following events shall constitute an "Event of Default": (a) default in the payment or performance, when due or payable, of any payment required under this Agreement or under any future agreement or supplement with you or under any agreement to which we are a party with third parties; (b)any warranty, representation, or other statement made or furnished to you by us or on our behalf or by any guarantor of our obligations hereunder or in connection herewith or in any instrument furnished in compliance with or in reference to this Agreement proves to have been false or misleading in any material respect when made or furnished or becomes false in any material respect; (c) we fail or neglect to perform, keep or observe any term, provision, condition. covenant, warranty or representation contained in this Agreement or in any other agreement between us or any rider or supplement which is required to be performed, kept or observed by us; (d) any statement, report, financial statement, or certificate made or delivered by us, or by any of our officers, employees or agents, to you is not true and correct in any material respect; (e) the imposition of a lien or encumbrance on any of our assets, including the Receivables, or the making of any levy, seizure or attachment on all or any of our assets, including the Receivables; (f) any material adverse change in our financial condition or the financial condition of any guarantor of our obligations hereunder; (g) we or any guarantor of our obligations hereunder become insolvent, or unable to meet our debts, as they mature, or fail, suspend or go out of business or a case is commenced under the Bankruptcy Code or an order for relief in a case under the Bankruptcy Code is entered with respect to us or any such guarantor, or a custodian or receiver (or other court designee performing the functions of a receiver) is appointed for or takes possession of either our or any such guarantor's assets or affairs; (h) we or any guarantor of our obligations hereunder cease to conduct our business as now conducted or are enjoined, restrained or in any way prevented by court, governmental or administrative order from conducting all or any material part of our business affairs; (i) a notice of any lien. levy or assessment is filed of record with respect to all or any of our assets by the United States, or any department, agency or instrumentality thereof, or by any state, county, municipal or other governmental agency, including, without limitation, the Pension Benefit Guaranty Corporation, if any taxes or debts owing at any time or times hereafter to any one of them becomes a lien or encumbrance upon any of the Receivables or any of our other assets and the same is not released within thirty (30) days after the same becomes a lien or encumbrance; (j) you shall in good faith deem yourself insecure or unsafe; (k) any guaranty given you with respect to our obligations, is limited or terminated or otherwise deemed unenforceable or invalid; (1) death of a guarantor of our obligations hereunder or in connection herewith, which guaranty is not replaced by a guarantor, acceptable to you in your sole discretion; or (m) we shall fail to pay our taxes when due unless such taxes are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been provided on our books. Upon the occurrence of an Event of Default you may, at your option, terminate this Agreement, any supplement or rider hereto and any agreement related hereto, and all Advances and other debts and obligations to you shall be immediately due and payable. Without further demand and upon five (5) days notice (which we agree constitutes reasonable notice) you may, at your option, sell and deliver any or all Receivables and any or all other Security held by or for you, at public or private sale, for cash, upon credit or otherwise, at such prices and upon such terms as you may deem advisable, in New York or at such other place or places as you may designate, at your sole discretion, and you may be the purchaser at any such sale, if it is public, free from any right of redemption which is also waived by us, or you may otherwise recover upon the Receivables in any commercially reasonable manner as you, in your sole discretion deem advisable. The proceeds of any sale shall be applied first to all costs and expenses 29 of sale, including attorneys' fees, and second to the payment (in whatever order you elect) of all of our obligations to you, whether absolute or contingent, or whether due or to become due, and whether under this Agreement or otherwise. Such obligations shall include damages sustained by reason of any default by us. You will return any surplus to us and we shall remain liable to you for any deficiency. Failure by you to exercise any right, remedy or option under this Agreement or any related agreement or delay by you in exercising the same will not operate as a waiver; no waiver by you will be effective unless it is confirmed in writing and then only to the extent specifically stated. In addition to all other sums due you, we will pay you all costs and expenses incurred by you, including a reasonable allowance for attorneys' fees and internal collection efforts, to obtain or enforce payment of Receivables, Advances, interest, or other charges due you hereunder or under any related agreement. Both you and we waive all right to a trial by jury in any litigation relating to transactions under this Agreement, supplements hereto and any related agreements and we agree not to assert any counterclaim of any nature in any such litigation. Your rights and remedies under this Agreement will be cumulative and not exclusive of any other right or remedy which you may have under the Uniform Commercial Code or other provisions of law; nothing herein contained shall limit or otherwise affect any other existing or future lien, security interest, or right to which you may be entitled. This Agreement cannot be changed or terminated orally, is our entire contract, and is for the benefit of and binding upon the parties hereto and their respective successors and assigns. 14. We will pay all of your out-of-pocket costs and expenses, including without limitation reasonable attorneys' fees and disbursements and appraisers, in connection with the preparation, execution and delivery of this Agreement, supplements hereto and related agreements, if any, and as they may be amended from time to time hereafter, and in connection with the prosecution or defense of any action, contest, dispute, suit or proceeding concerning any matter in any way arising out of, related to, or connected with this Agreement, supplements hereto and related agreements. We will also pay all of your out-of-pocket costs and expenses, including without limitation reasonable attorneys' fees and disbursements, in connection with (a) the preparation, execution and delivery of any waiver, amendment or consent proposed or executed in connection with the transactions contemplated by this Agreement and any supplements hereto and related agreements, (b) your obtaining performance of our obligations under this Agreement and any supplements hereto and related agreements, including, but not limited to, the enforcement or defense of your security interests, assignments of rights and liens hereunder and under any supplements hereto and related agreements as valid first security interests, (c) any attempt to inspect, verify, protect collect, sell, liquidate or otherwise dispose of any security held by you, and (d) any consultations in connection with any of the foregoing. We shall also pay your customary charges for all services performed by you for us at our request and all banking facility charges incurred in connection with the opening and operation of our account with you. In addition, and not as a limitation of the above, we shall pay you $500 per month to perform any collateral monitoring namely any field examination, collateral analysis or other business analysis, the need for which is determined by you and for which monitoring is undertaken by you or for your benefit, plus all costs and disbursements incurred by you in the performance of such examinations or analysis. All charges, costs and expenses reflected therein, together with all filing, recording and search fees, taxes and interest payable by us to you shall be payable on demand and may be charged by you to our account. Very truly yours, METRO SERVICES GROUP, INC. Attest: By: /s/ Jeremy Barbera /s/ Claudia Barbera --------------------------------------- - ------------------------------ Jeremy Barbera, Chief Executive Officer Claudia Barbera, Secretary Date: April , 1997 -------------------------------------- Accepted at New York, New York Address: 333 Seventh Avenue -------------------------------------- MILBERG FACTORS, INC. New York, NY 10001 -------------------------------------- By: - -------------------------------------- Theodore M. O'Lear, Sr. Vice President Date: April , 1997 - -------------------------------------- 30 EX-10.20 4 SEVERANCE AGREEMENT WITH BARRY PETERS EXHIBIT 10.20 SEVERANCE AGREEMENT WITH BARRY PETERS This agreement (the "Agreement) by and between ALL-COMM MEDIA CORPORATION, a Nevada Corporation, having an address at 400 Corporate Pointe, Suite 780, Culver City, CA 90230 (the "Company"), and BARRY PETERS, having an address at 680 Harbor Street, Unit #6, Venice, California, 90291 (the "Executive"), dated as of March 31, 1997, supersedes and rescinds the Employment Agreement, dated effective on July 1, 1995, by and between the Company and the Executive (the "Employment Agreement"). THIS AGREEMENT INCLUDES A GENERAL RELEASE OF ALL CLAIMS. WHEREAS, the Company and the Executive entered into the Employment Agreement which, among other things, sets forth the terms and conditions of the Executive's employment and the rights and obligations of both parties. WHEREAS, circumstances have changed since the signing of the Employment Agreement. NOW, THEREFORE, in consideration of the premises and mutual promises herein contained, it is agreed as follows: 1. VOLUNTARY RESIGNATION By executing this Agreement, the Executive resigns from his position as Chairman and Chief Executive Officer of the Company, effective April 14, 1997 (the "Termination Date"). In addition, the Executive resigns, effective immediately, as a director of the Company, and as a director and/or officer of each subsidiary of the Company for which the Executive serves as a director and/or officer. 2. CONSIDERATION As severance for the termination of the Employment Agreement, the Company shall pay to the Executive $390,000.00, without offset, in cash; $100,000.00 of which shall be paid upon execution of this Agreement and the balance shall be paid in eighteen (18) equal monthly payments commencing May 14, 1997 and continuing on the 14th day of each month thereafter until paid. In the event that any monthly payment is more than ten (10) days late, the entire unpaid balance shall accelerate and be due and payable and such unpaid balance shall from then on until paid bear interest at the simple annual rate of 10%. In addition, upon execution of this Agreement, the Company shall pay the Executive the sum of $46,066.00 in cash, representing his unpaid salary net of advances through the Termination Date. The Company shall withhold any deductions required by federal or California state law from the $46,066.00 payment. In addition, upon execution of this Agreement, the Company shall pay the Executive the sum of $780.55 in cash as reimbursement for his reimbursable business expenses through the Termination Date. The Executive shall receive medical benefits for himself and his immediate family, pursuant to the Executive's rights under COBRA, at the Company's expense, for a period of one (1) year after the Termination Date. The obligation to pay the $290,000 in installment payments shall be evidenced by a promissory note ("Promissory Note") in the form set out in Exhibit "A" hereto. 3. STOCK OPTIONS The Company and the Executive acknowledge that the only rights, options or warrants to purchase shares of capital stock of the Company that the Executive owns, of record and beneficially are: (i) an option (the "First Option") to acquire 150,000 shares of common stock of the Company at an exercise price of $2.00 per share pursuant to a Non-qualified Stock Option Agreement dated as of December 1, 1995 (the "First Option Agreement), and (ii) an option to acquire 300,000 shares of common stock of the Company; of which 150,000 shares are at an exercise price of $2.50 per share and 150,000 shares of which are at an exercise price of $ 3.00 per share pursuant to a Non-qualified Stock Option Agreement, dated as of September 26, 1996 (the "Second Option" and together with the First Option, the "Options"). The Company hereby agrees that the First Option shall automatically be amended 31 to provide that the provisions terminating the First Option ninety (90) days after termination of the Executive's relationship to the Company as an employee of, or consultant to, the Company, or any of its subsidiaries or affiliates shall be deleted, and the only time limiting the exercise of the First Option shall be seven (7) years from the date of the First Option Agreement. The Company confirms that the Option Cancellation Agreement, dated as of November 20, 1996 between the Company, the Executive, and Barry Peters, is of no force and effect, in as much as the offering contemplated by such Option Cancellation Agreement was not consummated. The Company agrees to file forthwith after the Termination Date a Registration Statement on Form S-8 or Form S-3 governing the resale of the shares of common stock (the "Underlying Shares") issuable upon exercise of the First Option and the Second Option from time to time and to have such Registration Statement declared effective by the Securities and Exchange Commission no later than ninety (90) days after the Termination Date at the Company's expense. Failure by the Company to have such a Registration Statement declared effective within the time prescribed shall cause the Lock-Up Restrictions (as defined below) to immediately, upon the expiration of such prescribed time period to be of no further force and effect as such restrictions apply to the Executive. In the event that a Registration statement on Form S-8 with respect to the Registration of the Underlying shares is not declared effective by the Securities and Exchange Commission within Ninety (90) days of the Termination Date the Executive shall be entitled to exercise the First and Second options by tendering a two year non-interest bearing promissory note and shall be entitled to include any or all of the Options or Underlying shares owned by the Executive on any Registration Statement registering shares of the Company's common stock, and with respect to which the Options and Underlying Shares are eligible to be included, filed by the Company in the future at the Company's expense. The Executive shall be entitled to make one demand to the Company to register all Options and Underlying Shares owned by the Executive provided that any such demand for registration shall only be made commencing nine (9) months after the Termination Date. Provided that the S-8 registration is filed and becomes effective within the specified Ninety (90) day period, the Executive agrees that he will not for a period of twelve (12) months after the Termination Date, directly or indirectly, sell, offer, offer to sell, contract to sell, make a short sale of, loan, grant any option for the sale of, transfer, or otherwise dispose of more than 40,000.00 of the Underlying Shares, or any other securities convertible into or exercisable or exchangeable for common stock which may be acquired by the Executive ("Securities") during any 90 day period, directly or indirectly, other than (i) as a gift, or to trusts for the benefit of family members of the Executive, provided that the transferee thereof agrees in writing to be bound by this Agreement, or by will or the laws of descent and distribution, provided that prior to such transfer of the Securities the transferee agrees in writing to be bound by this Agreement, or (ii) with the prior written consent of the Company. This does not include shares of the Company's common stock owned by the Executive on the Termination Date. (Any transaction covered by the foregoing restriction is referred to as a "Transfer" and the foregoing Restriction is referred to as the "Lock-up Restriction"). This Agreement shall not apply to or restrict a Transfer of Any Securities from the Executive to a third party in an non-public transaction, provided that the Transfer otherwise complies with applicable securities laws, that such third party agrees in writing to be bound by all of the provisions of this Agreement, and that such third party receives the approval of the Company's Board of Directors for such transfer, which approval will not be unreasonably withheld. The Company agrees to maintain the effectiveness of any such Registration Statement, including by filing any amendment or supplement thereto as may be required by the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, for so long as the Executive shall own any Options or underlying shares. The Company agrees to use its best efforts to have the resale of such Options and/or Underlying Shares qualified under any applicable "Blue Sky" laws. The exercise of any option is not subject to approval by the option committee or any other person or group of persons. The Executive may elect to exercise any Option by tendering shares of the Company's common stock at market price to pay for the exercise of Options. 4. RETURN OF MATERIALS The Executive shall immediately. return to the Company all confidential, technical, financial, and business information, including lists of customers, files, prices, memoranda and records, credit cards, cardkey passes, door and file keys, computer access codes, computer equipment, computer programs, software information systems, and all other physical or personal property which the Executive received or prepared or helped prepare in connection with his employment, except that the Executive is hereby transferred ownership to the Micron Transport Computer furnished to the Executive by the Company, without charge or cost to the Executive. 32 5. CONFIDENTIALITY - RESTRICTIVE COVENANT During the period the Executive is receiving severance pursuant to this Agreement and at all times thereafter, the Executive will keep confidential and shall not disclose to any third party or use on his own behalf or on behalf of any third party in any manner or for any reason, without the Company's prior written consent, any trade secrets or confidential Company information not generally available to the public, as defined in the Uniform Trade Secrets Act. 6. DENIAL OF ANY VIOLATIONS This Agreement and General Release shall not in any way be construed as an admission by the Company that it has acted wrongfully with respect to the Executive or any other person, or that the Executive has any rights whatsoever against the Company, and the Company specifically disclaims any liability to or wrongful acts against the Executive or any other person, on the part of itself, its employees or its agents. 7. MUTUAL GENERAL RELEASE AND DISCHARGE Except for the rights and obligations created by this Agreement, the Company and the Executive, for themselves and their respective trustees directors, officers, agents, attorneys, insurers, employees, stockholders, representatives, assigns, successors, past and present, and each of them, and any persons or entities acting by, through, under or in concert with each or any of them (the "Releasing Parties"), hereby and forever release and discharge each other, and their respective trustees, directors, officers, agents, attorneys, insurers, employees, stockholders, representatives, assigns, successors, past and present, and each of them, and any persons or entities acting by, through, under or in concert with each or any of them, from any and all causes of action, accountings, obligations, indebtedness, damages, losses, claims, suits, costs, liabilities, expenses, attorneys fees, allegations and demands, whether known or unknown, now existing or that might arise hereafter, based on, or arising out of, any circumstances whatsoever. The Releasing Parties acknowledge that they have been advised by legal counsel, or are otherwise familiar, with the provisions of California Civil Code Section 1542 which provides as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. The Releasing Parties, being aware of said code section, hereby expressly waive any rights they might have thereunder, as well as under any other statutes or common law principles of similar effect. 8. RESCISSION The Executive and the Company acknowledge that the contractual relationship between them arising out of the Employment Agreement as well as the obligations and rights arising under the Employment Agreement is and are rescinded and is and are null and void and will have no future effect and that Executive and the Company will have no future employment or contractual obligation, except as to those which arise out of this Agreement. 9. INDEMNIFICATION; INSURANCE The Company shall indemnify, defend, and hold harmless the Executive against all liability, demands, claims, costs, losses. damages, administrative proceedings and/or orders, recoveries, assessments, settlements, and expenses (including interest, penalties, attorneys fees, accounting fees, expert witness fees, costs and expenses of any sort) incurred by the Executive, known or unknown, contingent or otherwise, directly or indirectly, arising out of Employee's activities as an officer, director, shareholder, employee and/or agent of the Company, or any of its affiliates or subsidiaries, to the fullest extent permitted by Nevada Corporation Law, and the Company's Articles of Incorporation and By-laws. 33 To the extent the Company maintains or acquires, any insurance policies (including directors and officers insurance, sexual harassment insurance and commercial general liability insurance) specifically insuring officers and director's of the Company against claims, the Executive shall be entitled to coverage thereunder as an insured. 10. FURTHER AGREEMENTS (a) The Executive hereby agrees to fully cooperate with the Company (including making himself available to give testimony) in connection with any present or future dispute or litigation in which the Company is a party. The Executive understands that he should not communicate with any person or entity with whom the Company has a dispute or litigation with respect to facts or circumstances surrounding such dispute or litigation. The Executive shall deliver to the Company at least five (5) business days prior written notice if he is called to give testimony in connection with any such dispute or litigation. As compensation for the rendering of any services by the Executive called for in this paragraph, the Company shall pay employee the sum of $500.00 per all or any part of each half day (4 hours) so spent together with expenses. (b) The Company and the Executive acknowledge and agree that the Executive, subject to Paragraph 5 hereof, shall be free to publicly cite and discuss his prior affiliation with, the responsibility and services performed for, and the activities of the Company in any reasonable manner and at such times as the Executive reasonably believes will be helpful to him in furthering his personal and professional obligations. (c) From and after the date of this Agreement the Executive shall not make any statements or remarks, directly or indirectly, to any persons, whether or not such persona are involved, in the business of the Company or its subsidiaries, of a disparaging nature with respect to the Company, its directors, officers, employees, agents or customers or their respective affiliates or the Company's business or operations. From and after the date of this Agreement the Company shall not, and the Company shall cause its officers, directors and employees not to make any statements or remarks of a disparaging nature with respect to the Executive. (d) The Company shall issue no press releases or make any public statements using the Executive's name without the prior written consent of the Executive. (e) The Company agrees to reimburse the Executive the sum $17,000.00 as and for attorneys fees incurred to Stephen D. Johnson which be paid upon execution of this Agreement. Additionally, the Company shall pay directly to Stephen D. Johnson upon execution of this Agreement the sum of $7,500.00 which is due and owing for services performed for the Company in connection with a previous contemplated public offering. (f) The Company shall continue lease payments, insurance coverage, and providing maintenance for Executive's automobile, or any substantially equivalent replacement automobile, for one (1) year after the Termination Date. 11. COMPLETE AGREEMENT This instrument, including exhibits, constitutes and contains the entire agreement and understanding concerning the Executive's employment, voluntary resignation, general release of all claims and other subject matters addressed herein between the Company and the Executive, and it supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, including the Employment Agreement, concerning the subject matter hereof. 12. SEVERABILITY OF INVALID PROVISIONS The provisions or this Agreement are severable, and if a court or an arbitrator of competent jurisdiction holds any provision of this Agreement to be illegal or unenforceable or invalid in whole or in part for any reason, the validity and enforceability of the remaining provisions, or portions of them, will not be affected and they shall remain in full force and effect. This Agreement shall survive the termination of any arrangements contained herein. 34 13. CHOICE OF LAW This Agreement and the rights and obligations of the Company and the Executive, shall be construed and enforced in accordance with the laws of the State of California without regard to the principles of conflict of laws. 14. CHOICE OF FORUM Any dispute that arises under, or out of , or relates to this Agreement (whether contract or tort) shall be resolved exclusively in the Culver Municipal Court or the Los Angeles County Superior Court, according to the subject matter jurisdiction of the dispute. The Company and the Executive stipulate that this Agreement shall be deemed to have been entered into in Culver City, California. 15. CONSTRUCTION OF AGREEMENT The Company and the Executive and their attorneys have participated fully in the review and revision of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this agreement. 16. COUNTERPART EXECUTION - EFFECT This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original. 17. LITIGATION - COSTS AND EXPENSES In any litigation, arbitration, or other proceeding by which one party either seeks to enforce its rights under this Agreement (whether in contract or tort) or seeks a declaration of rights or obligations under this Agreement, or raises a factual or legal issue arising out of the Agreement, the prevailing party shall be awarded reasonable attorneys fees, together with any costs of suit and expenses, incurred in order to litigate or resolve or appeal the dispute and/or to enforce the final judgment, whether or not the matter is dismissed (voluntarily or involuntarily), settled, or proceeds to judgment or verdict. 18. MODIFICATION This Agreement may be supplemented, amended, or modified only by the mutual agreement of the Company and the Executive. No supplement, amendment, or modification of this Agreement shall be binding unless it is in writing and signed by both the Company and the Executive. 19. TIME Time is of the Essence in respect to all provisions of this Agreement that specify a time for performance; provided however, that the foregoing shall not be construed to limit or deprive a party of the benefits of any grace or use period allowed in this Agreement. 20. WAIVER No waiver of a breach, failure of any condition, or right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right or remedy. No waiver or any breach, failure, right or remedy shall be deemed a waiver of any other breach, failure, right or remedy, whether or not similar, nor shall any waiver constitute a continuing waiver unless the writing so specifies. 21. FULL UNDERSTANDING AND VOLUNTARY ACCEPTANCE The Company and the Executive represent and agree that it/he fully understands its/his right to discuss all aspects of this Agreement including the general release with its/his private attorney, that it/he has availed itself/himself, to this right, that it/he has carefully read and fully understands all of the provisions of this Agreement, and that it/he is voluntarily entering into this Agreement. 35 22. HEADINGS - NOT BINDING The use of headings in this Agreement is only for ease of reference and the headings have no affect and are not to be considered part or a term of this agreement. 23. NECESSARY ACTS, FURTHER ASSURANCES The Company and the Executive shall execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Agreement. 24. RATIFICATION AND ENTRY IN MINUTES The Board of Directors of the Company shall ratify the Agreement and cause the Agreement and Promissory note to be entered into the minutes of the Company. /s/ Barry Peters ------------------------------------------------ BARRY PETERS (the Executive) ALL-COMM MEDIA CORPORATION (the Company) BY: /s/ Jeremy Barbera ---------------------------------------------- Name: Jeremy Barbera Title: Chairman and CEO 36 PROMISSORY NOTE EXHIBIT "A" ----------- $290,000.00 Culver City, California. April 14, 1997 For value received, ALL-COMM MEDIA CORPORATION, a corporation organized under the laws of the State of Nevada (the "Maker"), promises to pay to BARRY PETERS, or order, at 680 Harbor Street, Unit #6, Venice, California, or at such other place the holder hereof may hereafter designate, the principal amount of Two Hundred Ninety Thousand Dollars ($290,000.00), without interest, payable in installments of Sixteen Thousand One Hundred Eleven Dollars and Eleven Cents ($16,111.11), or more, on the fourteenth (14th) of each month for Eighteen (18) months beginning May 14, 1997 and continuing until October 14, 1998 on which day the unpaid balance shall be due and payable. The Maker of this Note waives diligence, presentment, protest and demand and notice of protest, notice of demand, notice of dishonor, and notice of non payment of this Note. The obligations of the Maker under this note shall be absolute and the Maker waives any and all rights to offset, deduct or withhold any payments or charges under this Note for any reason whatsoever. Should any installment payment be more than ten (10) days late, the entire balance of this Note shall be immediately due at the option of the holder of this note, and upon such default, the entire unpaid balance of this Note shall immediately bear simple annual interest at the rate of ten (10%) percent. Time is of the essence of this Note. Principal and interest shall be payable in lawful money of the United States. This Note, and the rights and obligations of the interested parties hereto, shall be construed and enforced in accordance with the laws of the State of California, without regard to the principles of conflict of laws. Any dispute that arises out of this Note shall be exclusively resolved in the appropriate California state court (Municipal or Superior) located Los Angeles County, California. In any litigation, arbitration, or other proceeding by which one interested party to this Note seeks to enforce its/his rights under this Note (whether in contract or tort) or seeks a declaration of rights or obligations under this Note, or raises a factual or legal issue arising out of this Note, the prevailing party shall be awarded reasonable attorneys fees, together with any costs of suit or expenses incurred in order to resolve or litigate or appeal the dispute, and/or to enforce the final judgment, whether or not the matter is dismissed (voluntarily or involuntarily), settled, or proceeds to judgment or verdict. ALL-COMM MEDIA CORPORATION By: /s/ Jeremy Barbera ------------------------------ Name: Jeremy Barbera Title: Chairman and CEO Address: 333 7th Ave., 20th Floor New York, New York 10001 37 EX-10.21 5 SEVERANCE AGREEMENT WITH E. WILLIAM SAVAGE EXHIBIT 10.21 SEVERANCE AGREEMENT WITH E. WILLIAM SAVAGE This agreement (the "Agreement) by and between ALL-COMM MEDIA CORPORATION, a Nevada Corporation, having an address at 333 7th Avenue, 20th Floor, New York, New York 10001 (the "Company"), and E. WILLIAM SAVAGE, having an address at P.O. Box 9729, Marina Del Rey, California, 90295 (the "Executive"), dated as of March 31, 1997, supersedes and rescinds the Employment Agreement, dated as of September 20, 1995, by and between the Company and the Executive (the "Employment Agreement"). THIS AGREEMENT INCLUDES A GENERAL RELEASE OF ALL CLAIMS. WHEREAS, the Company and the Executive entered into the Employment Agreement which, among other things, sets forth the terms and conditions of the Executive's employment and the rights and obligations of both parties. WHEREAS, circumstances have changed since the signing of the Employment Agreement. NOW, THEREFORE, in consideration of the premises and mutual promises herein contained, it is agreed as follows: 1. VOLUNTARY RESIGNATION By executing this Agreement, the Executive resigns from his position as Executive Vice President of the Company, effective April 18, 1997 (the "Termination Date"). In addition, the Executive resigns, effective immediately, as a director of the Company and as a director and/or officer of each subsidiary of the Company for which the Executive currently serves as a director and/or officer. 2. CONSIDERATION As severance for the termination of the Employment Agreement, the Company shall pay to the Executive $350,000, in cash, less $64,261 previously advanced by the Company to the Executive; $35,739.00 of which shall be paid upon execution of this Agreement and the remaining $250,000 shall be paid in eighteen (18) equal monthly payments commencing May 14, 1997 and continuing on the 14th day of each month thereafter until paid. In the event that any monthly payment is more than ten (10) days late, the entire unpaid balance shall accelerate and be due and payable and such unpaid balance shall from then on until paid bear interest at the simple annual rate of 10%. In addition upon execution of this Agreement, the Company shall pay the Executive the sum of $38,423.00 in cash, representing his unpaid salary through the Termination Date. The Company shall withhold any deductions required by federal or California state law from the $38,423.00 payment. In addition, upon execution of this Agreement, the Company shall pay the Executive the sum of $13,366.00 for paid vacation time not taken by the Executive. The Company shall withhold any deductions required by federal or California state law from the $13,366.00 payment. In addition, upon execution of this Agreement, the Company shall pay the Executive the sum of $154.00 in cash as reimbursement for his reimbursable business expenses through the Termination Date. The Executive shall receive medical benefits for himself and his immediate family, pursuant to the Executive's rights under COBRA, at the Company's expense, for a period of one (1) year after the Termination Date. The obligation to pay the $250,000 in installment payments shall be evidenced by a promissory note ("Promissory Note") in the form set out in Exhibit "A" hereto. 3. STOCK OPTIONS The Company and the Executive acknowledge that the only rights, options or warrants to purchase shares of capital stock of the Company that the Executive owns, of record and beneficially are: (i) an option (the "First Option") to acquire 150,000 shares of common stock of the Company at an exercise price of $2.00 per share pursuant to a Non-qualified Stock Option Agreement dated as of December 1, 1995 (the "First Option Agreement), and (ii) an option to acquire 300,000 shares of common stock of the Company; of which 150,000 shares are at an exercise price of $2.50 per share and 150,000 shares of which are at an exercise price of $3.00 per share pursuant to 38 a Non-qualified Stock Option Agreement, dated as of September 26, 1996 (the "Second Option" and together with the First Option, the "Options"). The Company hereby agrees that the First Option shall automatically be amended to provide that the provisions terminating the First Option ninety (90) days after termination of the Executive's relationship to the Company as an employee of, or consultant to, the Company, or any of its subsidiaries or affiliates shall be deleted, and the only time limiting the exercise of the First Option shall be seven (7) years from the date of the First Option Agreement. The Company confirms that the Option Cancellation Agreement, dated as of November 20, 1996 between the Company, the Executive, and E. William Savage, is of no force and effect, in as much as the offering contemplated by such Option Cancellation Agreement was not consummated. The Company agrees to file forthwith after the Termination Date a Registration Statement on Form S-8 or Form S-3 governing the resale of the shares of common stock (the "Underlying Shares") issuable upon exercise of the First Option and the Second Option from time to time and to have such Registration Statement declared effective by the Securities and Exchange Commission no later than ninety (90) days after the Termination Date at the Company's expense. Failure by the Company to have such a Registration Statement declared effective within the time prescribed shall cause the Lock-Up Restrictions (as defined below) to immediately, upon the expiration of such prescribed time period to be of no further force and effect as such restrictions apply to the Executive. In the event that a Registration statement on Form S-8 with respect to the Registration of the Underlying shares is not declared effective by the Securities and Exchange Commission within Ninety (90) days of the Termination Date the Executive shall be entitled to exercise the First and Second options by tendering a two year non-interest bearing promissory note and shall be entitled to include any or all of the Options or Underlying shares owned by the Executive on any Registration Statement registering shares of the Company's common stock, and with respect to which the Options and Underlying Shares are eligible to be included, filed by the Company in the future at the Company's expense. The Executive shall be entitled to make one demand to the Company to register all Options and Underlying Shares owned by the Executive provided that any such demand for registration shall only be made commencing nine (9) months after the Termination Date. Provided that the S-8 registration is filed and becomes effective within the specified Ninety (90) day period, the Executive agrees that he will not for a period of twelve (12) months after the Termination Date, directly or indirectly, sell, offer, offer to sell, contract to sell, make a short sale of, loan, grant any option for the sale of, transfer, or otherwise dispose of more than 40,000.00 of the Underlying Shares, or any other securities convertible into or exercisable or exchangeable for common stock which may be acquired by the Executive ("Securities") during any 90 day period, directly or indirectly, other than (i) as a gift, or to trusts for the benefit of family members of the Executive, provided that the transferee thereof agrees in writing to be bound by this Agreement, or by will or the laws of descent and distribution, provided that prior to such transfer of the Securities the transferee agrees in writing to be bound by this Agreement, or (ii) with the prior written consent of the Company. This does not include shares of the Company's common stock owned by the Executive on the Termination Date. (Any transaction covered by the foregoing restriction is referred to as a "Transfer" and the foregoing Restriction is referred to as the "Lock-up Restriction"). This Agreement shall not apply to or restrict a Transfer of Any Securities from the Executive to a third party in an non-public transaction, provided that the Transfer otherwise complies with applicable securities laws, that such third party agrees in writing to be bound by all of the provisions of this Agreement, and that such third party receives the approval of the Company's Board of Directors for such transfer, which approval will not be unreasonably withheld. The Company agrees to maintain the effectiveness of any such Registration Statement, including by filing any amendment or supplement thereto as may be required by the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, for so long as the Executive shall own any Options or underlying shares. The Company agrees to use its best efforts to have the resale of such Options and/or Underlying Shares qualified under any applicable "Blue Sky" laws. The exercise of any option is not subject to approval by the option committee or any other person or group of persons. The Executive may elect to exercise any Option by tendering shares of the Company's common stock at market price to pay for the exercise of Options. 39 4. RETURN OF MATERIALS The Executive shall immediately. return to the Company all confidential, technical, financial, and business information, including lists of customers, files, prices, memoranda and records, credit cards, cardkey passes, door and file keys, computer access codes, computer equipment, computer programs, software information systems, and all other physical or personal property which the Executive received or prepared or helped prepare in connection with his employment, except that the Executive is hereby transferred ownership to the Micron Desktop Computer furnished to the Executive by the Company, without charge or cost to the Executive. 5. CONFIDENTIALITY - RESTRICTIVE COVENANT During the period the Executive is receiving severance pursuant to this Agreement and at all times thereafter, the Executive will keep confidential and shall not disclose to any third party or use on his own behalf or on behalf of any third party in any manner or for any reason, without the Company's prior written consent, any trade secrets or confidential Company information not generally available to the public, as defined in the Uniform Trade Secrets Act. 6. DENIAL OF ANY VIOLATIONS This Agreement and General Release shall not in any way be construed as an admission by the Company that it has acted wrongfully with respect to the Executive or any other person, or that the Executive has any rights whatsoever against the Company, and the Company specifically disclaims any liability to or wrongful acts against the Executive or any other person, on the part of itself, its employees or its agents. 7. MUTUAL GENERAL RELEASE AND DISCHARGE Except for the rights and obligations created by this Agreement, the Company and the Executive, for themselves and their respective trustees directors, officers, agents, attorneys, insurers, employees, stockholders, representatives, assigns, successors, past and present, and each of them, and any persons or entities acting by, through, under or in concert with each or any of them (the "Releasing Parties"), hereby and forever release and discharge each other, and their respective trustees, directors, officers, agents, attorneys, insurers, employees, stockholders, representatives, assigns, successors, past and present, and each of them, and any persons or entities acting by, through, under or in concert with each or any of them, from any and all causes of action, accountings, obligations, indebtedness, damages, losses, claims, suits, costs, liabilities, expenses, attorneys fees, allegations and demands, whether known or unknown, now existing or that might arise hereafter, based on, or arising out of, any circumstances whatsoever. The Releasing Parties acknowledge that they have been advised by legal counsel, or are otherwise familiar, with the provisions of California Civil Code Section 1542 which provides as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. The Releasing Parties, being aware of said code section, hereby expressly waive any rights they might have thereunder, as well as under any other statutes or common law principles of similar effect. 8. RESCISSION The Executive and the Company acknowledge that the contractual relationship between them arising out of the Employment Agreement as well as the obligations and rights arising under the Employment Agreement is and are rescinded and is and are null and void and will have no future effect and that Executive and the Company will have no future employment or contractual obligation, except as to those which arise out of this Agreement. 40 9. INDEMNIFICATION; INSURANCE The Company shall indemnify, defend, and hold harmless the Executive against all liability, demands, claims, costs, losses. damages, administrative proceedings and/or orders, recoveries, assessments, settlements, and expenses (including interest, penalties, attorneys fees, accounting fees, expert witness fees, costs and expenses of any sort) incurred by the Executive, known or unknown, contingent or otherwise, directly or indirectly, arising out of Employee's activities as an officer, director, shareholder, employee and/or agent of the Company, or any of its affiliates or subsidiaries, to the fullest extent permitted by Nevada Corporation Law, and the Company's Articles of Incorporation and By-laws. To the extent the Company maintains or acquires, any insurance policies (including directors and officers insurance, sexual harassment insurance and commercial general liability insurance) specifically insuring officers and director's of the Company against claims, the Executive shall be entitled to coverage thereunder as an insured. 10. FURTHER AGREEMENTS (a) The Executive hereby agrees to fully cooperate with the Company (including making himself available to give testimony) in connection with any present or future dispute or litigation in which the Company is a party. The Executive understands that he should not communicate with any person or entity with whom the Company has a dispute or litigation with respect to facts or circumstances surrounding such dispute or litigation. The Executive shall deliver to the Company at least five (5) business days prior written notice if he is called to give testimony in connection with any such dispute or litigation. As compensation for the rendering of any services by the Executive called for in this paragraph, the Company shall pay employee the sum of $500.00 per all or any part of each half day (4 hours) so spent together with expenses. (b) The Company and the Executive acknowledge and agree that the Executive, subject to Paragraph 5 hereof, shall be free to publicly cite and discuss his prior affiliation with, the responsibility and services performed for, and the activities of the Company in any reasonable manner and at such times as the Executive reasonably believes will be helpful to him in furthering his personal and professional obligations. (c) From and after the date of this Agreement the Executive shall not make any statements or remarks, directly or indirectly, to any persons, whether or not such persona are involved, in the business of the Company or its subsidiaries, of a disparaging nature with respect to the Company, its directors, officers, employees, agents or customers or their respective affiliates or the Company's business or operations. From and after the date of this Agreement the Company shall not, and the Company shall cause its officers, directors and employees not to make any statements or remarks of a disparaging nature with respect to the Executive. (d) The Company shall issue no press releases or make any public statements using the Executive's name without the prior written consent of the Executive. (e) The Company agrees to reimburse the Executive the sum $3,500.00 as and for attorneys fees which be paid upon execution of this Agreement. (f) The Company shall continue lease payments, insurance coverage, and providing maintenance for Executive's automobile, or any substantially equivalent replacement automobile, for one (1) year after the Termination Date. (g) The Company shall pay its American Express bill for which the Executive has given a personal guaranty. 11. COMPLETE AGREEMENT This instrument, including exhibits, constitutes and contains the entire agreement and understanding concerning the Executive's employment, voluntary resignation, general release of all claims and other subject matters addressed herein between the Company and the Executive, and it supersedes and replaces all prior 41 negotiations and all agreements proposed or otherwise, whether written or oral, including the Employment Agreement, concerning the subject matter hereof. 12. SEVERABILITY OF INVALID PROVISIONS The provisions or this Agreement are severable, and if a court or an arbitrator of competent jurisdiction holds any provision of this Agreement to be illegal or unenforceable or invalid in whole or in part for any reason, the validity and enforceability of the remaining provisions, or portions of them, will not be affected and they shall remain in full force and effect. This Agreement shall survive the termination of any arrangements contained herein. 13. CHOICE OF LAW This Agreement and the rights and obligations of the Company and the Executive, shall be construed and enforced in accordance with the laws of the State of California without regard to the principles of conflict of laws. 14. CHOICE OF FORUM Any dispute that arises under, or out of , or relates to this Agreement (whether contract or tort) shall be resolved exclusively in the Culver Municipal Court or the Los Angeles County Superior Court, according to the subject matter jurisdiction of the dispute. The Company and the Executive stipulate that this Agreement shall be deemed to have been entered into in Culver City, California. 15. CONSTRUCTION OF AGREEMENT The Company and the Executive and their attorneys have participated fully in the review and revision of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this agreement. 16. COUNTERPART EXECUTION - EFFECT This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original. 17. LITIGATION - COSTS AND EXPENSES In any litigation, arbitration, or other proceeding by which one party either seeks to enforce its rights under this Agreement (whether in contract or tort) or seeks a declaration of rights or obligations under this Agreement, or raises a factual or legal issue arising out of the Agreement, the prevailing party shall be awarded reasonable attorneys fees, together with any costs of suit and expenses, incurred in order to litigate or resolve or appeal the dispute and/or to enforce the final judgment, whether or not the matter is dismissed (voluntarily or involuntarily), settled, or proceeds to judgment or verdict. 18. MODIFICATION This Agreement may be supplemented, amended, or modified only by the mutual agreement of the Company and the Executive. No supplement, amendment, or modification of this Agreement shall be binding unless it is in writing and signed by both the Company and the Executive. 19. TIME Time is of the Essence in respect to all provisions of this Agreement that specify a time for performance; provided however, that the foregoing shall not be construed to limit or deprive a party of the benefits of any grace or use period allowed in this Agreement. 42 20. WAIVER No waiver of a breach, failure of any condition, or right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right or remedy. No waiver or any breach, failure, right or remedy shall be deemed a waiver of any other breach, failure, right or remedy, whether or not similar, nor shall any waiver constitute a continuing waiver unless the writing so specifies. 21. FULL UNDERSTANDING AND VOLUNTARY ACCEPTANCE The Company and the Executive represent and agree that it/he fully understands its/his right to discuss all aspects of this Agreement including the general release with its/his private attorney, that it/he has availed itself/ himself, to this right, that it/he has carefully read and fully understands all of the provisions of this Agreement, and that it/he is voluntarily entering into this Agreement. 22. HEADINGS - NOT BINDING The use of headings in this Agreement is only for ease of reference and the headings have no affect and are not to be considered part or a term of this agreement. 23. NECESSARY ACTS, FURTHER ASSURANCES The Company and the Executive shall execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Agreement. 24. RATIFICATION AND ENTRY IN MINUTES The Board of Directors of the Company shall ratify the Agreement and cause the Agreement and Promissory note to be entered into the minutes of the Company. /s/ E. William Savage --------------------------------------------------- E. WILLIAM SAVAGE (the Executive) ALL-COMM MEDIA CORPORATION (the Company) BY: /s/ Jeremy Barbera ----------------------------------------------- Name: Jeremy Barbera Title: Chairman & CEO 43 PROMISSORY NOTE EXHIBIT "A" ----------- $250,000.00 Culver City, California. April 18, 1997 For value received, ALL-COMM MEDIA CORPORATION, a corporation organized under the laws of the State of Nevada (the "Maker"), promises to pay to E. WILLIAM SAVAGE, or order, at P.O. Box 9729, Marina Del Ray, California 90295, or at such other place the holder hereof may hereafter designate, the principal amount of Two Hundred Fifty Thousand Dollars ($250,000.00), without interest, payable in installments of Thirteen Thousand Eight Hundred Eighty Eight Dollars and Eighty Eight Cents ($13,888.88), or more, on the fourteenth (14th) of each month for Eighteen (18) months beginning May 14, 1997 and continuing until April l4, 1998 on which day the unpaid balance shall be due and payable. The Maker of this Note waives diligence, presentment, protest and demand and notice of protest, notice of demand, notice of dishonor, and notice of non payment of this Note. The obligations of the Maker under this note shall be absolute and the Maker waives any and all rights to offset, deduct or withhold any payments or charges under this Note for any reason whatsoever. Should any installment payment be more than ten (10) days late, the entire balance of this Note shall be immediately due at the option of the holder of this note, and upon such default, the entire unpaid balance of this Note shall immediately bear simple annual interest at the rate of ten (10%) percent. Time is of the essence of this Note. Principal and interest shall be payable in lawful money of the United States. This Note, and the rights and obligations of the interested parties hereto, shall be construed and enforced in accordance with the laws of the State of California, without regard to the principles of conflict of laws. Any dispute that arises out of this Note shall be exclusively resolved in the appropriate California state court (Municipal or Superior) located Los Angeles County, California. In any litigation, arbitration, or other proceeding by which one interested party to this Note seeks to enforce its/his rights under this Note (whether in contract or tort) or seeks a declaration of rights or obligations under this Note, or raises a factual or legal issue arising out of this Note, the prevailing party shall be awarded reasonable attorneys fees, together with any costs of suit or expenses incurred in order to resolve or litigate or appeal the dispute, and/or to enforce the final judgment, whether or not the matter is dismissed (voluntarily or involuntarily), settled, or proceeds to judgment or verdict. ALL-COMM MEDIA CORPORATION By: /s/ Jeremy Barbera ------------------------------ Name: Jeremy Barbera Title: Chairman & CEO Address: 333 7th Ave., 20th Floor New York, New York 10001 44 EX-10.22 6 FORM OF PRIVATE PLACEMENT PURCHASE AGREEMENT EXHIBIT 10.22 FORM OF PRIVATE PLACEMENT PURCHASE AGREEMENT ------------------------------------ April __, 1997 All-Comm Media Corporation 333 Seventh Avenue New York, New York 10001 re: Purchase of Notes ----------------- Gentlemen: I. The undersigned ("Subscriber") has reviewed the filings which All-Comm Media Corporation (the "Company") has made with the Securities Exchange Commission during the past 12 months. The Company represents and warrants to the Subscriber that all such filings are correct and accurate in all material respects and in all material respects state all facts necessary to make such filings not misleading. Subscriber has had the opportunity to discuss the Company's affairs with the Company's officers. II. Sale of Notes. A. The Company hereby sells to Subscriber, and Subscriber hereby purchases from the Company the principal amount of Convertible Notes ("Notes") set forth opposite its name below. The purchase price for each Note is equal to the principal amount thereof and is payable in cash concurrently with the execution and delivery hereof. B. The Notes are in the form of Exhibit A annexed hereto. C. The term "Purchasers" as used herein means subscribers who in the aggregate are on this day purchasing Notes in the aggregate principal amount of $________ under agreements of the same tenor as this Agreement. III. The Company shall forthwith pay to Mueller Trading Company a finders fee equal to 7% of all cash amounts paid by Purchasers for the Notes. IV. The prior written consent of the holders of a majority in interest of the Notes shall be required before the Company effects any offering of securities under Regulation D or Regulation S or under any other exemption from registration requirements under the Securities Act of 1933. This paragraph shall cease to be effective on the later to occur of December 31, 1997 or the 90th day after the effectiveness of the Registration Statement (as hereinafter defined). V. Registration. A. The Company will file before the 30th day after the date of this Agreement, a registration statement on Form S-3 (the "Registration Statement") for the public sale by Subscriber of the shares which are issuable on conversion of the Notes. The shares to be covered by the Registration Statement are collectively referred to as the "registered shares." B. The Company shall use its diligent efforts to cause the Registration Statement to become effective not later than 90 days after the date of filing, and to remain effective for two years. The registration shall be accompanied by blue sky clearances in such states as Subscriber may reasonably request. C. The Company shall pay all expenses of the registration hereunder, other than Subscriber's underwriting discounts. D. The Company shall supply to Subscriber a reasonable number of copies of all registration materials and prospectuses. The Company and Subscriber shall execute and deliver to each other indemnity agreements which are conventional in registered offerings of this type. The Subscriber shall reasonably cooperate with the Company in the preparation and filing of the Registration Statement and appropriate amendments thereto. E. Subscriber may transfer a proportionate part of its registration rights to transferees of the Notes or portions thereof. 45 VI. Certain Representations. A. Subscriber represents and warrants that it is purchasing the Notes solely for investment solely for its own account and not with a view to or for the resale or distribution thereof. B. Subscriber understands that it may sell or otherwise transfer the Notes or the shares issuable on conversion of the Notes only if such transaction is duly registered under the Securities Act of 1933, as amended, under the Registration Statement or otherwise, or if Subscriber shall have received the favorable opinion of counsel to the holder, which opinion shall be reasonably satisfactory to counsel to the Company, to the effect that such sale or other transfer may be made in the absence of registration under the Securities Act of 1933, as amended, and registration or qualification in every applicable state. The certificates representing the aforesaid securities will be legended to reflect these restrictions, and stop transfer instructions will apply. Subscriber realizes that the Notes are not a liquid investment. C. Subscriber has not relied upon the advice of a "Purchaser Representative" (as defined in Regulation D of the Securities Act) in evaluating the risks and merits of this investment. Subscriber has the knowledge and experience to evaluate the Company and the risks and merits relating thereto. D. Subscriber represents and warrants that Subscriber is an "accredited investor" as such term is defined in Rule 501 of Regulation D promulgated pursuant to the Securities Act of 1933, as amended, and shall be such on the date any shares are issued to the holder; Subscriber acknowledges that Subscriber is able to bear the economic risk of losing Subscriber's entire investment in the shares and understands that an investment in the Company involves substantial risks; Subscriber has the power and authority to enter into this agreement, and the execution and delivery of, and performance under this agreement shall not conflict with any rule, regulation, judgment or agreement applicable to the Subscriber; and Subscriber has invested in previous transactions involving restricted securities. VII. This Agreement may not be changed or terminated except by written agreement. It shall be binding on the parties and on their personal representatives and permitted assigns. It sets forth all agreements of the parties. It shall be enforceable by decrees of specific performance (without posting bond or other security) as well as by other available remedies. VIII. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada. The federal and state courts sitting in the State of Nevada shall have exclusive jurisdiction over all matters relating to this Agreement. Trial by jury is expressly waived. IX. All notices, requests, service of process, consents, and other communications under this Agreement shall be in writing and shall be deemed to have been delivered (i) on the date personally delivered, or (ii) one day after properly sent by Federal Express, addressed to the respective parties at their address set forth in this Agreement, or (iii) upon being transmitted by facsimile so long as a confirmation copy is simultaneously forwarded by Federal Express, in each case addressed to the respective parties at their address set forth in this Agreement. Either party hereto may designate a different address by providing written notice of such new address to the other party hereto as provided above. X. Each party hereto shall be responsible for its own expenses with regard to the negotiation and execution of this Agreement. SUBSCRIBER:_____________________ AGREED: Signature ALL-COMM MEDIA CORPORATION type or print name:_____________ Address:________________________ By:_____________________________ Fax No._________________________ Title: Social Security No:_____________ Principal Amount of Notes: $_____________ 46 EXHIBIT A THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED, DISPOSED OF OR OFFERED FOR SALE, IN WHOLE OR IN PART, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT COVERING THIS NOTE AND/OR THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ALL-COMM MEDIA CORPORATION, THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE. $__________________ CONVERTIBLE NOTE (the "Note") ALL-COMM MEDIA CORPORATION ALL-COMM MEDIA CORPORATION, a Nevada corporation (hereinafter called the "Corporation"), for value received, hereby promises to pay to the order of ________________________ (hereinafter the "Holder") the principal sum of $__________ on April 15, 1999, together with interest accruing at the rate of 6% per annum and payable at maturity or, if earlier, upon conversion. Principal and interest shall be payable at the address of the Holder. I. This Note is one of a duly authorized issue of Convertible Notes of the Corporation (designated herein as the "Notes"), and is being issued under Private Placement Purchase Agreements of similar tenor between the Corporation and the Holder (the "Subscription Agreement"). The Holders of the Notes are referred to herein collectively as "Purchasers." II. Conversion Rights. A. The Holder shall have the right at any time or times prior to maturity, in its sole discretion, to convert the principal amount of this Note and/or the accrued interest thereon, in whole or in part, into a number of shares (the "Conversion Shares") of the Corporation's common stock (the "Common Stock" equal to the amount converted divided by the Conversion Price. The Conversion Price means a price per share equal to the lesser of $2.50 per share or 83% of the average closing bid price of the Common Stock during the last five trading days prior to conversion. B. The Note shall be convertible at any time only to the extent that Holder would not as a result of such exercise beneficially own more that 4.99% of the then outstanding Common Stock. Beneficial ownership shall be defined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. The opinion of counsel to Holder shall prevail in the event of any dispute on the calculation of Holder's beneficial ownership. C. In the event that the Holder elects to exercise its conversion rights hereunder, it shall give to the Corporation written notice of such election (which may be by fax) and shall surrender this Note to the Corporation for cancellation against payment of interest accrued through the date of conversion. Conversion shall be effective upon such notice provided that the Note is surrendered within a reasonable time thereafter. D. In the event that the Holder proposes to convert all or any portion of the principal or interest of this Note at a time when the conversion price would be less than $1.50, the Corporation shall at its option be entitled to redeem all or any portion of the Note proposed to be converted. Such option shall be exercisable by paying to the Holder, within three business days after the date of such proposed conversion, 117% of the amount of principal proposed to be converted and 117% of the amount of interest proposed to be converted. E. The Corporation shall at all times reserve and keep available out of its authorized and unissued common shares, solely for issuance upon the conversion of the Note as herein provided, such number of common shares as shall from time to time be issuable upon the conversion of the Note. 47 III. Adjustments to Conversion Rights. A. In case the Corporation shall issue common stock as a dividend upon common stock or in payment of a dividend thereon, shall subdivide the number of outstanding shares of its common stock into a greater number of shares or shall contract the number of outstanding shares of its common stock into a lesser number of shares, the number of Conversion Shares to which the Holder is entitled to receive pursuant to Section 2 shall be adjusted, effective at the close of business on the date such common shares are to be issued, so that the Conversion Shares shall be equal to the product obtained by multiplying the Conversion Shares in effect immediately prior to the close of business on such date by a fraction, the denominator of which shall be the number of shares of common stock outstanding immediately prior to such dividend, subdivision, or contraction, and the numerator of which shall be the number of shares of common stock outstanding immediately after such dividend, subdivision or contraction. B. If any capital reorganization or reclassification of the common stock, or consolidation, or merger of the Corporation with or into another corporation, or the sale or conveyance of all or substantially all of its assets to another corporation shall be effected, then, as a condition precedent of such reorganization or sale, the following provision shall be made: The Holder of the Note shall from and after the date of such reorganization or sale have the right to receive (in lieu of the shares of common stock of the Corporation immediately theretofore receivable with respect to such Note, upon the exercise of conversion rights), such shares of stock, securities or assets as would have been issued or payable with respect to or in exchange for the number of outstanding shares of such common stock immediately theretofore receivable with respect to such Note. In any such case, appropriate provision shall be made with respect to the rights and interests of the Holders to the end that such conversion rights (including, without limitation, provisions for appropriate adjustments) shall thereafter be applicable, as nearly as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise thereof. IV. Registration Rights and Certain Remedies. The Subscription Agreements provide for the filing by the Company of a registration statement for the sale of the shares issuable on conversion of this Note. Notwithstanding anything to the contrary set forth herein: if the registration statement hereinafter referred to is not effective by the 110th day after the date hereof, then, in addition to the Subscriber's other remedies: A. the interest rate under the Notes shall be increased to 18% per annum (or, if less, the highest rate permitted by law) until the registration statement is declared effective, and B. at Subscriber's option, the Notes shall not be repaid by the Company and shall remain convertible and accrue interest, until such date as is designated by Subscriber but not later than 180 days after the effectiveness of the registration statement. V. Purchase for Investment. The Holder, by acceptance hereof, acknowledges that the Note (and the Common Stock into which the Note is convertible) has not been registered under the Act, covenants and agrees with the Corporation that such Holder is taking and holding this Note (and the Common Stock into which the Note is convertible) for investment purposes and not with a view to, or for sale in connection with, a distribution thereof and that this Note (and the Common Stock into which the Note is convertible) may not be assigned, hypothecated or otherwise disposed of in the absence of an effective registration statement under the Act or an opinion of counsel for the Holder, which counsel shall be reasonably satisfactory to the Corporation, to the effect that such disposition is in compliance with the Act, and represents and warrants that such Holder is an "accredited investor" that such Holder has, or with his representative has, such knowledge and experience in financial and business matters to be capable of evaluating the merits and risks in respect of this Note (and the Common Stock into which the Note is convertible) and is able to bear the economic risk of such investment. VI. Events of Default and Acceleration of the Note. An "event of default" with respect to this Note shall exist if any of the following shall occur: A. The Corporation shall breach or fail to comply with any provision of this Note and such breach or failure shall continue for thirty (30) days after written notice by any Holder of any Note to the Corporation. 48 B. A receiver, liquidator or trustee of the Corporation or of a substantial part of its properties shall be appointed by court order and such order shall remain in effect for more than sixty (60) days; or the Corporation shall be adjudicated bankrupt or insolvent; or a substantial part of the property of the Corporation shall be sequestered by court order and such order shall remain in effect for more than sixty (60) days; or a petition to reorganize the Corporation under any bankruptcy, reorganization or insolvency law shall be filed against the Corporation and shall not be dismissed within sixty (60) days after such filing. C. The Corporation shall file a petition in voluntary bankruptcy or request reorganization under any provision of any bankruptcy, reorganization or insolvency law, or shall consent to the filing of any petition against it under any such law. D. The Corporation shall make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or consent to the appointment of a receiver, trustee or liquidator of the Corporation, or of all or any substantial part of its properties. If an event of default shall occur, the Holder may, in addition to such Holder's other remedies, by written notice to the Corporation, declare the principal amount of this Note, together with all interest accrued thereon, to be due and payable immediately. Upon any such declaration, such amount shall become immediately due and payable and the Holder shall have all such rights and remedies provided for under the terms of this Note and the Stock Pledge Agreement. VII. Miscellaneous. A. All notices and other communications required or permitted to be given hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by telegram, recognized overnight mail carrier, telex or other standard form of telecommunications, or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: (a) if to the Holder, to such address as such Holder shall furnish to the Corporation in accordance with this Section, or (b) if to the Corporation, to it at its headquarters office, or to such other address as the Corporation shall furnish to the Holder in accordance with this Section. B. THIS NOTE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. C. The Corporation waives protest, notice of protest, presentment, dishonor, notice of dishonor and demand. D. If any provision of this Note shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein. E. The waiver of any event of default or the failure of the Holder to exercise any right or remedy to which it may be entitled shall not be deemed a waiver of any subsequent event of default or of the Holder's right to exercise that or any other right or remedy to which the Holder is entitled. F. The Holder of this Note shall be entitled to recover his legal and other costs of collecting on this Note, and such costs shall be deemed added to the principal amount of this Note. G. In addition to all other remedies to which the Holder may be entitled hereunder, Holder shall also be entitled to decrees of specific performance without posting bond or other security. IN WITNESS WHEREOF, the Corporation has caused this Note to be duly executed on the date first written above. ATTEST: ALL-COMM MEDIA CORPORATION . ______________________________ By: ________________________________ Name: Name: Title: Title: 49 EX-11.1 7 COMPUTATION OF NET LOSS PER SHARE EXHIBIT 11.1 STATEMENTS REGARDING COMPUTATION OF NET LOSS PER SHARE
Three Months Ended Nine Months Ended March 31 March 31 -------- -------- 1997 1996 1997 1996 ------------ ----------- ------------- ------------ Net loss per share was calculated as follows: Net loss $(7,971,721) $ (421,876) $(10,711,811) $(1,328,410) Periodic non-cash accretions on redeemable convertible preferred stock (786,803) Non-cash, non-recurring dividends on conversions of redeemable preferred B stock (8,466,412) Non-recurring dividends on repurchase of redeemable preferred C stock (573,305) Net loss attributable to common stockholders (7,971,721) (421,876) (20,538,331) (1,328,410) Primary: Weighted average common shares outstanding 8,291,764 3,047,543 5,639,573 3,027,624 Incremental shares under stock options computed under the treasury stock method using the average market price of the issuer's common stock during the periods 425,862 194,714 324,331 99,128 Weighted average common and common equivalent shares outstanding unless antidilutive 8,291,764 3,047,543 5,639,573 3,027,624 Net loss per common share (0.96) (.14) (3.64) (.44) Fully diluted: Weighted average common shares outstanding 8,291,764 3,047,543 5,639,573 3,027,624 Incremental shares under stock options computed under the treasury stock method using the market price of the issuer's common stock at the end of the periods if higher than the average market price 425,862 194,714 324,331 99,128 Weighted average common and common equivalent shares outstanding unless antidilutive 8,291,764 3,047,543 5,639,573 3,027,624 Net loss per common share (0.96) (.14) (3.64) (.44)
EX-27.1 8 FINANCIAL DATA SCHEDULE - ARTICLE 5
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ALL-COMM MEDIA CORPORATION AS OF AND FOR THE NINE MONTHS ENDED MARCH 31, 1997 INCLUDED IN THIS REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS YEAR JUN-30-1997 JUL-01-1996 MAR-31-1997 482,660 0 4,635,997 (26,000) 0 5,290,723 915,295 (146,012) 21,788,010 7,112,414 0 0 0 114,386 11,146,785 21,788,010 16,146,217 16,146,217 3,789,313 3,789,313 16,392,265 0 353,246 (10,679,789) (32,022) (10,711,811) 0 0 0 (10,711,811) (3.64) (3.64)
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